Monetary Stability and a Sad Independence
As the intensity and pace of clashes escalate along Lebanon's southern border with the Israeli enemy, coinciding with the war of extermination waged by Israel against the Palestinians in Gaza and the risks of an all-out war breaking out, and amid sterile domestic disputes, Banque du Liban issued Intermediate Circular No. 682 on November 17, 2023, containing Intermediate Decision No. 13592. The decision amended Basic Decision 13335 and expanded the range of beneficiaries of Circular 158 by allowing accounts that were closed or transferred from one bank to another after October 31, 2019, which had prevented them from benefiting from it at the time, to benefit from this circular.
It should be noted that Basic Circular No. 158 puts into effect Basic Decision No. 13335 dated June 8, 2021, which allowed the gradual repayment of foreign-currency deposits held in accounts opened before October 31, 2019. It did so by allowing depositors who meet the conditions of this circular to withdraw $400 in cash per month, provided that total annual withdrawals do not exceed $4,800, in addition to the equivalent of this amount in Lebanese pounds based on the Sayrafa platform rate at the time, half of it in cash and the other half credited to the account to be spent via bank cards, checks, or transfers to another account inside Lebanon at the same bank or at another bank.
The new circular comes after Banque du Liban had issued, on September 15, 2023, an intermediate circular bearing No. 678, circulating Central Council Decision No. 13580 issued on the same date. That decision concerned extending the validity of Basic Circular No. 158 after amending it, allowing those who benefited from its provisions before July 1, 2023, to continue withdrawing $400 in cash per month, without the additional equivalent amount in Lebanese pounds. As for clients who had not benefited from the provisions of this circular before July 1, 2023, they may withdraw only $300 in cash per month, provided that their total annual withdrawals do not exceed $3,600.
Worth mentioning is that Circular 682, according to the statement issued by the Central Council of Banque du Liban, is the result of an understanding between the bank and the Association of Banks in Lebanon to give a new segment of depositors the opportunity to benefit from this circular, and it is intended to do justice to depositors within the limits of currently available capabilities and within the framework of the powers of the Acting Governor of Banque du Liban. The Central Council's statement also contained a renewed affirmation of the need to find a final solution that secures the rights of all depositors through an understanding among all stakeholders to adopt a comprehensive plan to resolve this national crisis.
This makes Intermediate Circular No. 682 a new attempt, and hopefully a serious one, to restore the needed confidence in the monetary policies of Banque du Liban, by extending its terms to new beneficiaries of the provisions of the aforementioned Basic Circular 158, especially after this intermediate circular halted the haircut process on withdrawals that Basic Circular 158 itself had caused for more than two years.
However, Intermediate Circular 682 covered neither accounts that were converted from Lebanese pounds into dollars after November 2019 nor accounts that remained as they were before that date and did not benefit from Circular 158. This leaves the deposits of this group of depositors suspended between withdrawing them at the rate of 15,000 Lebanese pounds to the US dollar, with the haircut on their deposits that this entails, or forgetting about them until an appropriate solution for all deposits crystallizes, bearing in mind that the conversion from pounds into dollars took place through the banks and with the approval of Banque du Liban at the time.
On the other hand, Banque du Liban continues to ensure the continuity of monetary stability by securing salaries amounting to $80 million per month until the end of February of the coming year, 2024, without touching what remains of depositors' funds or other reserves. This confirms the continued stability of the exchange rate despite certain attempts to which Banque du Liban was alerted in due time, and bolsters hopes that Banque du Liban will be able to extend stability to dates beyond next February, particularly since this achievement was realized at this critical juncture in the history of Lebanon and the region.
It should be noted that the volume of fees and taxes collected by the state is sufficient to pay the salaries of public sector employees, military and security agencies, and retirees, as well as sufficient to meet its monthly expenditures, which are limited to operating expenses. The Acting Governor of Banque du Liban, Dr. Mansouri, had alluded to the size of these revenues at the press conference he held on the eve of assuming the governorship at the end of last July, calling on the state to rely on its own revenues to meet its expenditures, and he continues to adhere to his commitment not to provide financing, including financing the emergency plan.
Furthermore, the foreign liquidity of Banque du Liban reached nearly $9 billion at the end of October 2023, compared with $8.78 billion in the middle of the same month. Meanwhile, Banque du Liban's balance sheet issued at the end of October showed an increase in its foreign assets of $153.62 million (1.10%) during the second half of October 2023 to $14.14 billion, equivalent to 212.17 trillion Lebanese pounds.
Despite the effectiveness of the monetary policies adopted by the Acting Governor of Banque du Liban, which have enabled him to extend the stability of the national currency's exchange rate at a time of growing economic challenges, political bickering, and emerging security dangers, this does not justify the absence of government plans to confront the various challenges and curb their repercussions that lie in wait for the nation and its people.
Indeed, genuine stability in the exchange rate of the Lebanese pound against foreign currencies cannot rest on monetary policies alone, which, important as they are, cannot single-handedly achieve even purely monetary objectives. Rather, fiscal and economic policies must meet them halfway to make stability sustainable and allow the recovery of economic growth, particularly since Lebanon has experienced, more than any other country, the consequences of confining economic remedies to monetary policies, which battered the national currency, squandered foreign-currency deposits and reserves, and caused the faltering of the banking sector, culminating in the economic collapse whose repercussions we are still living through today.
As for Independence Day, it comes heavy with sorrow this year, grieving not only for the martyrs of Lebanon and Gaza, resistance fighters and innocent children and women alike, but also for the republic, whose authority is fading away and whose institutions are crumbling in the absence of a president of the republic to steer it to safety. Perhaps those concerned will find in Independence Day an incentive to extricate the required reforms from the labyrinth in which they have been circling and to put an end to the financial and economic crisis in which the country is floundering, by addressing the causes of the crisis in its entirety rather than merely achieving monetary stability.
Translated from Arabic with AI. Read it in Arabic