More Than Mere Monetary Stability Is Needed

As the intensity and pace of clashes escalate on 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 on November 17, 2023, Intermediate Circular No. 682, containing Intermediate Decision No. 13592, which 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 this circular at the time, to benefit from it. It is worth noting that Basic Circular No. 158 promulgates 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, by allowing a depositor who meets the conditions of this circular to withdraw 400 dollars in cash per month, provided that total annual withdrawals do not exceed 4,800 dollars, 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 in the account to be spent via bank cards or checks or transferred to another account within Lebanon at the same bank or at another bank. The new circular comes after Banque du Liban had issued on September 15, 2023, Intermediate Circular No. 678, by which it promulgated Central Council Decision No. 13580 issued on the same date, concerning the extension of Basic Circular No. 158 after its amendment, allowing beneficiaries of its provisions prior to July 1, 2023, to continue withdrawing 400 dollars 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 prior to July 1, 2023, they may withdraw in cash only 300 dollars per month, provided that their total annual withdrawals do not exceed 3,600 dollars. It is also worth mentioning 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 comes in order 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 agreement among all concerned parties 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 required confidence in the monetary policies of Banque du Liban, by extending its scope to new beneficiaries of the provisions of the aforementioned Basic Circular 158, especially after this intermediate circular halted the haircut on withdrawals that Basic Circular 158 itself had caused for over two years. However, Intermediate Circular 682 did not cover accounts 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 a 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 takes shape, bearing in mind that the conversion from pounds into dollars was carried out through the banks and with the approval of Banque du Liban at the time. On the other hand, Banque du Liban continues to ensure ongoing monetary stability by securing salaries worth 80 million US dollars 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 good time, and bolsters hopes that Banque du Liban will be able to extend stability to dates beyond next February, especially as this achievement took place at this critical juncture in the history of Lebanon and the region. It is worth noting that the volume of fees and taxes collected by the state is sufficient to pay the salaries of public sector employees, the military and security agencies, and retirees, and is likewise 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 volume 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 revenues to meet its expenditures, and he remains committed to refraining from providing financing, including financing the emergency plan. Moreover, the foreign liquidity of Banque du Liban stood at nearly 9 billion US dollars at the end of October 2023, compared with 8.78 billion US dollars in the middle of the same month, while Banque du Liban's balance sheet issued at the end of October showed an increase in its foreign assets of 153.62 million US dollars (1.10%) during the second half of October 2023 to 14.14 billion US dollars, 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 mounting economic challenges, political bickering, and emerging security dangers, this does not justify the absence of government plans to confront these various challenges and curb their effects lurking in wait for the country and its people. True stability in the exchange rate of the Lebanese pound against foreign currencies cannot rest on monetary policies alone, which, despite their importance, cannot single-handedly achieve even purely monetary objectives; rather, fiscal and economic policies must meet them halfway to make stability sustainable and allow for the restoration of economic growth, especially since Lebanon, more than any other country, has experienced the consequences of confining economic remedies to monetary policies, which battered the national currency, squandered deposits and foreign currency reserves, and caused the banking sector to falter, culminating in the economic collapse whose repercussions we are still living through today. As for Independence Day, it comes sorrowfully this year, mourning not only the martyrs of Lebanon and Gaza, resistance fighters and innocents, children and women, but also the republic whose authority is fading and whose institutions are eroding 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 are circling and 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 achieving monetary stability alone.

Translated from Arabic with AI. Read it in Arabic