Beneficiaries behind Lebanon’s “failure” to pay debts

The Banque du Liban has opened an investigation to determine whether there are internal parties taking advantage of the issue of the country’s failure to pay its debts.

“We are also investigating whether some individuals have amassed a fortune through this process, which they were informed in advance,” the bank’s governor, Riad Salameh, said, adding that the debt default had cut off Lebanon’s funding sources.

Lebanon announced, in March, that it might not pay its outstanding debts on time, and suspended the payment of $1.2 billion due on March 9, putting the heavily indebted country on the path of defaulting on sovereign debt, at a time when it is facing a major financial crisis.

With regard to depositors’ money, the Governor of the Banque du Liban indicated that it depends on the plan that the government will adopt.

He said, “The current plan includes broad lines, but no details. Historically, there were no recovery programs in the world that punished depositors in a country.”

He expressed his hope that “the Lebanese authorities will take this point into consideration during their negotiations with the International Monetary Fund, adding that Lebanon has an interest in having a program with the International Monetary Fund, and therefore depositors are, to some extent, at the mercy of the negotiations between the government and the International Monetary Fund.” .

He added, “They are trying to transfer losses to the Central Bank, but there is also a diversion of attention to pit depositors once morest the Banque du Liban, which was applying the laws.”

Salameh stressed that “Lebanon needs, above all, the necessary political stability to revive the economy, because this recovery will return funds to banks and, consequently, to depositors.”

He renewed his opposition to selling gold, explaining the mechanism adopted by the Banque du Liban to stabilize the exchange rate.

In this regard, he stressed that “the reserves of the Central Bank amount to 11.8 billion dollars.”

And the credit rating agency Fitch said that the road remains difficult for Lebanon to get out of the default situation on its sovereign obligations.

The outgoing Lebanese Cabinet approved a roadmap for financial recovery during its last session before moving to the status of a caretaker. The plan includes canceling a “significant part” of the Central Bank of Lebanon’s foreign currency obligations to commercial banks and dissolving banks that are not eligible to continue by November.

But the Association of Banks in Lebanon objected to the road map a few days ago, saying that it puts the full losses of the economic collapse in the country on the shoulders of depositors.

The Lebanese local currency has lost more than 95 percent of its value since the economic downturn began in 2019, and banks are no longer allowing foreign currency depositors to access their savings.