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Lebanon is preparing for the battle to tighten its economic rope, after successive strikes that hit it, and reports indicate it is experiencing the worst economic crisis in decades, and 45 percent of Lebanese are slipping underneath. of the poverty line.
The repercussions of the Crown epidemic that imposed the general mobilization and its extension until May 24, the paralysis was reflected on several levels, adding to the matter, and the Lebanese government announced on Thursday April 30 that it would seek help from the Fund International Monetary Fund to end the collapse, and that came After unanimously approving a bailout reform plan, he said it would constitute a “road map” to relaunch the economic wheel amid street anger.
The response came quickly from the Association of Lebanese Banks, through a statement entitled “On the White Shark and the Black Day,” in which it announced that it could “in no way” approve a government economic rescue plan on the that was not consulted, that could destroy confidence in Lebanon and hinder investment, and harm any opportunity To recover, the association noted that the income and expenditure procedures are “vague” and are not backed by a precise timetable for implementation , and the statement emphasized adherence to a private sector, as a first condition for the rebirth of Lebanon again.
The association had asked parliamentarians to reject the plan because it violated partial ownership of private property, but the call for discussion did not come from the parliament presidency, but from the President of the Republic, Michel Aoun, who called the heads from the parliamentary blocks to “a national meeting at the Baabda Palace on the sixth Wednesday of May to present the government’s reform program.”
The latest figures on financial deposits with Lebanese banks reported a decrease from around $ 170 billion to $ 147 billion, after the daily bleeding of depositors and transfers that took place abroad, but the problem, according to bank sources, is that these numbers are book numbers, that is, on paper, while banks do not have more than two or three billion dollars in cash abroad, and the same sources indicate that the government’s economic plan was based on the “Lazard” study, and the study had observed 21 laws that must be passed before implementing any amendment to the established banking system. It has been in Lebanon since A. For over 70 years, it can only be implemented (i.e. the plan) only after amending the laws.
$ 21 billion
The Bank of Lebanon has stated that its liquidity amounts to around $ 21 billion, which includes current accounts between the Bank of Lebanon and the Lebanese state, or the debts that the BDL has with the Lebanese state. All of this comes amid a rapid depreciation of the Lebanese pound, a shortage of imports, a slowdown in banking movements, thousands of layoffs, and the concerns of a people centered on the question “Where did my Egyptians go?”
The responsibility of the three parties in the crisis, the government, the banks and the Bank of Lebanon, that is, the economy, cash and money for the crisis, as well as the contribution to the rescue and the implications of the banks that do not implement central bank circulars are questions asked by “Independent Arabia” to experts in economics and law.
In this context, the president of the Lebanese Institute for Market Studies, Dr. Patrick Mardini, said that “the government had the responsibilities of all parties to the crisis, but it excluded itself, and the government held banks and its owners as depositors of losses of $ 86 billion, but overlooked that most of these losses are the ones who committed it when they decided not to pay their debts, but the second part of the responsibility falls on the Bank of Lebanon when it adopted the policy of setting the exchange rate, and the smallest part of the responsibility falls on depositors with an amount of approximately 10 billion dollars, so the main problem is the amount of 70 billion dollars that caused by General sector of the Bank of Lebanon, and as banks exposed to the public sector as a result of debt, they are forced to bear losses.
State debt
Regarding the rescue operation, Mardini points out that “the plan proposed by the government does not address the causes of the crisis, since the main problem is in the state’s debt, and the plan does not note or address the causes of the problem, but for one of the most important and most important reasons are “the huge losses in the electricity sector due to the sale of electricity at less than its price and cost, and the plan explicitly stated that the government will not adjust the price of electricity to Despite the fact that oil prices are the lowest in the world, and that the government recognizes the origin of the crisis but does not want a reform, but rather proposes to increase production based on the path of a plan previously presented to the Cedar Conference, priced at $ 5.4 billion, is located in this Who will lend Lebanon this large sum?
Regarding the reforms, Mardini added: “By converting the price of electricity at a variable rate, here the government can whistle for losses, and instead of borrowing $ 5.4 billion, it can require private companies to build plants of production, but the state insists that it pay with its money to carry out projects through public agreements and these agreements are the main cause of public debt. “
Stop funding the state
As for the Bank of Lebanon, it loses due to the policy of stabilizing the exchange rate and financing the state by increasing the money supply, but the increase in the monetary bloc led to the weakening of the lira in the exchange market, and therefore was interfering with the sale of the dollar and the purchase of the lira to stabilize the exchange rate, this has led to large losses “And the plan proposed by the government is to move from a fixed exchange rate to a floating exchange system, and unfortunately, if the same approach continues, that is, increasing the money supply to finance government spending, we will not reach a floating exchange rate, but rather overwhelmed, then we will have started to deteriorate. Except for the people, since banks , the central bank and the government were not completed. Take this approach. “
Mardini believes that the solution is for the BDL to stop financing the Lebanese state, adding that monetary reform is achieved by changing the monetary system in Lebanon, replacing the central bank with a currency board, which is a credible system, and avoids that the monetary authorities print any pound if it is not In exchange for a dollar, the Lebanese pound will be covered in 100 percent in dollars, “which will lead to a permanent fixing of the price of the lira.”
On the subject of commercial banks, “losses are up to $ 83 billion, which fixes the banks’ capital loss of approximately $ 21 billion, and the amount of $ 62 billion to be charged to depositors. But the question is, which depositors will have the coverage of this amount, if they are the ones who have 500 thousand dollars or more than 100 thousand dollars ?, and the second question, in any case, is whether by deduction or by giving them shares in the bank, or in the transfer of their money to the lira at the price of 1500, various means to control the money of the depositors.
“The problem in the Lebanese banking system is that it is still closed. The Lebanese market must open up to international banks, and this makes us avoid a future crisis, since the Lebanese state cannot impose on foreign banks the purchase of bonds from the Treasury by force. Also, Lebanese banks will not be able to control the deposit as you do now. “
Absolute cooperation
Lawyer Ali Zbib, an international legal expert on banking matters, says of the responsibility of the three parties in the rescue operation: “The responsibility must be shared, since the greatest responsibility lies with the government, which deals with all decisions. which bind all parties, and must play its role in monitoring the Bank of Lebanon AND the banks, “as for the Bank of Lebanon,” play the most important role because the bank’s overall mission is to build Article 70 of the Cash and Credit Act amended to preserve cash and secure a foundation for lasting economic and social growth in particular. And what sucks to do? Rack today and the abuse of discretionary circulars applied, so Lebanese banks not only comply with the Money and Credit Law, but also with the Lebanese Penal Code and the Lebanese trade law, which means not to breach the banking agreement, “what what is happening today. “
Zbeeb believes that reviving the economy again requires absolute cooperation between the government and the Bank of Lebanon and the banks, through the rule of law and pressing the parliament to make a series of important amendments to existing laws, for example , but not limited to the illicit enrichment law, which is considered insufficient.
To get out of the economic stagnation and new situations resulting from the outbreak of the Corona epidemic, Zbib says: “Banks systematically participated in increasing the consequences of the economic situation, through their mismanagement of the currency crisis, but they were not blame unilaterally, because the blame falls on the political class. ” However, the banks decided that He is involved in a broad process of lending to the Lebanese state, which is a state of default and bankruptcy, and at the same time, at the first intersection, the banks dispensed with the relationship with customers through the reserve funds process and through a discretionary process by extracting large numbers of beneficiaries and funders near the bank and politicians, in addition to this matter, AND When the Bank of Lebanon attempted to issue some insufficient circulars, the banks abused these circulars, especially of Circular No. 148, which referred to small deposits of less than three thousand dollars or five million Lebanese pounds, and closed the accounts that benefited from this circular.
Punish the banks
Consequently, it hit the principle of financial inclusion, which is at the center of banking, and constituted an unacceptable exclusion of the vast majority of the Lebanese people. “Therefore, banks must make up for what they committed by trying to create” products “that did not exist, for example, by raising the limits on financial withdrawals, and it is known that the dollar is not available. But at least pay the value of the withdrawals at the market price and not at 3,000 lire, which is equivalent to losing around 28 percent of the value of the currency, simply, banks must comply with the law to exit the recession.
Regarding the legal consequences for banks if they do not commit to implement or implement Banque du Liban circulars, Zbeeb explains that “Article 140 modified in accordance with Legislative Decree 41 of 1967 stipulates that each bank will be removed from the list of banks if it is placed in liquidation, or if it declares that it is in a state of suspension What we are concerned about is the clause of the declaration that stops payment, legally, the banks did not declare, but evaded when they refused to give the depositor their money, instead she gave him bank checks.
As for the third point of Article 140, then it becomes clear to the Supreme Banking Authority that one of the banks is no longer in a position to continue its business, “This applies to a large number of banks in Lebanon, and whether that authority fulfilled its duties, it would have simply decided to cancel it, knowing that the governor of the central bank only has the right to be alerted, but the rest of the sanctions stipulated in Article 208 cannot be taken unilaterally, but said sanctions must be decided therefore, given the absence of a central council and the inability of the Supreme Banking Authority to fulfill its obligations, it is impossible to punish the offending banks.
* Quoted from “Independent Arabia”
** All published articles represent only the opinion of their authors.
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