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Lebanese wardrobe On Friday, a draft law was approved to limit the losses suffered by Lebanese banks during the country’s financial meltdown in 2019 and to provide a mechanism to return depositors’ funds that were destroyed at the time.
The financial collapse, which wiped out billions in savings and left many people unable to access their wealth, was part of a fiscal crisis that followed decades of corruption, financial mismanagement and nefarious profiteering.
The draft law, which still has to be approved by Parliament to become law, is the first step by the government in returning funds to individual depositors whose bank accounts were frozen.
Thirteen ministers voted in favor of the draft law, dubbed the “Financial Gap Law”, and nine against. During the cabinet meeting, action was demanded by protesting outside the government headquarters and doubts were raised on the law.
It remained unclear when the Lebanese parliament would consider the draft. Its passage in the Assembly could be delayed – a pattern seen in many previous attempts to reform the financial system.
There is a blame game going on over who is ultimately responsible for Lebanon’s economic crisis and the evaporation of people’s savings.
banks The government has been accused of corruption, while critics argue that the banks operated a Ponzi-like scheme, using new deposits to pay off old depositors rather than maintaining adequate reserves. Former central bank governor Riad Salameh, who is wanted internationally on corruption charges, has claimed to have consistently opposed such practices.
Lebanese Prime Minister Nawaf Salam issued a statement after the cabinet meeting, promising that once the law is implemented, small depositors – who “comprise 85% of depositors” – will receive their full deposits over four years, while larger depositors will recover their money gradually – up to the first $100,000 in cash.
The remaining large deposits will be converted into tradable bonds backed by the central bank’s revenues and assets, totaling about $50 billion, Salaam said.
He rejected charges that the bonds were “worthless”, and said that large depositors could get a portion of their money back each year. “For example, a depositor with $3 million could recover about $60,000 per year,” he said.
Salam also said that the law had a clause ensuring accountability, and denied claims that the law was a “forgive and forget” measure.
The bill would introduce a legislative framework to restructure Lebanon’s troubled financial sector after years of standoff between political groups, banks and the central bank governor.
It touches upon measures that International Monetary Fund There has been a long standing demand to include clear rules for returning depositors’ funds, restructuring of bank liabilities and improving transparency.
The IMF has previously expressed frustration over more than half a decade of negotiations with Lebanon, which has yet to produce an approved recovery plan aimed at improving the economy and restoring investor confidence.
The Lebanese currency has lost more than 90% of its value against the dollar, pushing more than half the population into poverty.
Lebanon’s financial crisis was exacerbated by Israel’s war with Lebanese militants. Hezbollah The grouping ended with a US-brokered ceasefire last November. A world bank The report said the estimated cost of Lebanon’s reconstruction and recovery after the 14-month war is about $11 billion.
Lebanon’s recently elected President Joseph Aoun and Prime Minister Salam have promised to implement reforms, including tackling the long-running economic crisis. The crisis is so severe that for years the country has relied on a largely cash-based economy, with widespread public distrust of banks and low levels of investment.