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The April 2022 issue examined three linked texts: the draft Capital Control Law (CCL) then before Parliament, the government's leaked recovery plan, and the staff-level agreement (SLA) signed with the IMF. It argued that capital controls, which should have been introduced in November 2019, had arrived too little and too late, and that the draft in circulation granted banks an effective amnesty for past irregularities, shielded them from depositor lawsuits, discriminated between fresh and older dollar deposits and left wide discretion to a committee outside judicial oversight.
On the recovery plan, the issue acknowledged that it was the first government document to recognise central bank losses above US$60 billion and to call for an independent audit, but criticised its core mechanism: writing off US$60 billion of Banque du Liban liabilities to banks and bailing in around US$90 billion of deposits above US$100,000. In the authors' view this was an accounting exercise without fresh capital that protected banks at the expense of the middle class, and they suggested that perpetual sovereign instruments would preserve more real value for depositors than bank shares.
The issue set the plan against the SLA's prior conditions and noted that the IMF placed capital controls at the very end of its list, suggesting they had lost relevance three years into the crisis.
Key findings
- Bank accounts had fallen from 2.9 million worth US$175 billion at end-2019 to 2.2 million worth US$120 billion at end-2021.
- Under the plan's US$100,000 threshold, 86% of depositors would recover their deposits, while some 184,000 holding US$90 billion would not.
- The SLA required audits of the 14 largest banks (about 83% of sector assets), banking secrecy reform, exchange rate unification and debt reduction to 100% of GDP by 2026 and 76% by 2032.
- The IMF estimated banking sector losses at US$72 billion, and Lebanon stood to receive a US$3 billion four-year facility if reforms were met.
Archive: written in Apr 2022; figures and assessments reflect conditions at the time of writing.Summary of the paper; the full analysis is in the PDF.