The tragedy of imposing a limit on withdrawals of lira from banks: “the Lebanese are isolated”

Former Greek Finance Minister Yannis Varoufakis reiterates that “the economy is too important to remain in the hands of economists.” In Lebanon, it can be confirmed that the economy is too dangerous to be left in the hands of “officials” who decided to turn it into a “field of experimentation” for their financial measures, and pay the price of all their policies at all stages of the economy. post-1992 economy. More than a month ago, certain banks began to impose caps on Withdrawals are in Lebanese pounds, whether it is from tellers or ATMs, which now operate according to a specific schedule and are not fed with cash except during the hours before noon. When clients confront employees, they get the answer: “The Bank of Lebanon does not allow us to obtain the required amounts from our checking account.” The matter raised the suspicion of depositors that the bank they were dealing with was on the verge of bankruptcy … before the blocked one appeared. Yesterday, the governor of the Banque du Liban, Riad Salameh, issued a “clarification” refusing to specify the caps for the amounts that banks can withdraw in lira. Upon exceeding these limits, the required amounts are calculated from the bank accounts frozen at Banque du Liban. Therefore, there is no limit to the amounts that can be withdrawn from the Banque du Liban. And then the source of funding for this liquidity will be different, which means that it is possible to make withdrawals from the checking account up to a certain limit, and what exceeds this limit in terms of certificates of deposit or term deposits. Whoever writes the “core” data, intends not to write simply so that citizens do not understand the meaning of the procedures. In practice, the Banque du Liban “protected” itself from depositors and payroll account holders from any “wave of anger”, placing the burden of responsibility on the banks.

The Central Bank says that it does not prevent banks from withdrawing the amount they want from the lira they have, but rather sends them a letter specifying the highest ceiling for withdrawals from the so-called “current account”, which ranges between 2,000 and 5 1 billion pounds a month, which vary according to the size of the bank’s capital. Previously, banks used to get what they wanted from this account. Now, in the event that the banks want to obtain a greater amount of pounds to cover the demands of their clients, any increase will be amortized either from the bank accounts frozen with the “central” and for which they were receiving high interest, or of debts that they lent to the Banque du Liban, or of certificates of deposit For example, if the interest on the certificate of deposit is 10%, 5 years remain to expire and Bank X requests amounts in pounds that exceed the assigned “installment”, the interest will be canceled for all years of maturity, not just for the current year. This procedure is considered by the banks as a “loss” for them, after the Banque du Liban has become the semi-exclusive customer of the banks and they have no other “source of income” left. At yesterday’s Banque du Liban Central Council meeting, banks were criticized for saying that “the amount in lire they withdraw monthly is now required every week.” Attendees heard an accusation from Salameh to the banks that “they take the pound and exchange it for dollars at the exchange houses”!
Apart from the ebb and flow between the two wings of the banking sector, Salameh’s decision has a profound impact on the purchasing power of citizens and the guarantee of their needs. With one million, two or three million Lebanese pounds a month, how can a family of four pay rent or housing premium, secure basic necessities, pay school fees, buy medicine and pay for a corona exam? ? You will not be able. The citizens of Lebanon will face a new type of humiliation imposed on them by the Bank of Lebanon and the banks, on the one hand, and the state, on the other, which has abandoned its role and does not want to decide what its social and economic policy is. .
“Instead of the central bank devaluing the currency, it reduced the value of people’s wages and money by limiting withdrawals. Monetary tools are being used to bring about drastic changes in behavior. “Comment from financial expert, Dan Azzi, who explains that” Salameh wants to cancel subsidies on basic products, and the resigned Prime Minister Hassan Diab rejected the measure, so the governor decided to reduce consumption. Currently, the citizen is obliged to determine what he will spend the little amount he receives each month: buy gasoline, go to the restaurant or buy subsidized medicines? Azzi compares the procedure of reducing consumption in Lebanon, and with other countries, “such as the United States, which increases the tax rate to push people to reduce their consumption of gasoline, because that should be government policy.”
The Banque du Liban defends itself that in recent months it has injected almost 14,000 million pounds into the market, “to allow depositors to withdraw their dollars stuck in the exchange rate of 3900 pounds against the dollar and to ensure the growing demand But the pressure on the pound increased and the money supply increased alarmingly. ” What the sources forget is that this “block” did not rise on its own. Rather, it was the Banque du Liban that used to print pounds above supply and demand, and one of its main objectives was to reduce the mass of deposits in banks, to reduce liabilities in their budgets and their budget. “Yes,” the sources reply, “but the block became huge and we discovered that it was not spent, but was stored or used to convert it into dollars.” She believes that the new method decided by Salama “will prevent traders from storing materials, but only import what is necessary.”
After months of driving inflation to its highest levels, the Banque du Liban decided to adjust its “strategy” and absorb the pound from the market, which means an economic contraction. And when there is a recession, the results are usually reduced demand due to lower consumption, the inability of the economy to create jobs, increased unemployment rates, high bankruptcies and a decrease in the value of assets and tax revenues … Dan Azzi explains that the measure “will stifle the economy, reduce national income and lead to reduced purchasing power.” We will see a difference in value between the pound seized in banks, which will lose its value, and the pound in cash. For example, a check for 10 million pounds will allow its owner to buy property for 5 million pounds.

Salameh accuses the banks of “taking the pound and exchanging it for dollars at the exchange houses”

The members of the Central Council continued to insist in their meeting yesterday that “there is a block of cash in pounds hidden in the houses, this procedure will allow its consumption and return to the banks. Whoever hides dollars in his possession will convert them into liras. We will reduce the cash economy by reducing the circulation of the lira ”. Azzi says, however, that this decision “will affect all sectors, since now they all need liquidity.” In this context, experts in financial markets do not rule out that “people will flee in the future, even from the location of wages.” In fact, more than that, banking sources ask, “How will the merchant handle his affairs if we smother him on the lira?” The problem is aggravated because it arises after the intermediate circular No. 573 of the Banque du Liban, which obliged merchants of fuel, medicine and wheat to pay the percentage they must cover – to ensure the price of imported subsidized goods- – in lira and in cash. Who will accept payment through the card after today? And where will the sufficient lira be obtained if the Central Bank wants to take it out of the market, not pump it? The “radicalism” of the Banque du Liban in solutions that are not based on any scientific logic heralds a great disaster.

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