Unifying the exchange rate of the lira…and the last leg of the journey!

Ali Zein Al-Din wrote in Asharq Al-Awsat newspaper: “Lebanon has reached the final stage of the journey to unify the lira’s exchange rates against hard currencies, based on the price set by the Central Bank, at 89.5 thousand liras per dollar, so that the final step remains pending on an expected decision by the Central Bank.” The Council of Ministers hereby determines the fair allowance for withdrawals of bank deposits made in dollars.”

Zain Al-Din continued,

According to private information, the government is in the process of including the file on its agenda after the holiday break, and deciding on it through an effective decision or an expedited draft law, according to the options that will be presented by Finance Minister Youssef Al-Khalil, who refused to bear responsibility for issuing the decision individually, and in prior coordination with the Governor of the Central Bank. Acting Dr. Waseem Mansouri, in accordance with his responsibilities in managing coins and cash flow.

Several complications emerged, ranging from complete suspension to partial and complete implementation by banks in implementing monthly withdrawals for the benefit of depositors, following the expiry of the deadline for implementing Circular “151” at the beginning of this year, which provided a monthly quota of $1,600 to be disbursed at a rate of 15,000 liras per dollar. That is, a total of 24 million liras, the market equivalent of about 268 dollars according to the official price, which means deducting about 83 percent of the book entry for the withdrawn amount.

Thus, it seems impossible, according to concerned sources and follow-up, to pursue options that lead to the continuation of the painful deduction methodology that included all withdrawals over 4 consecutive years, especially after repeated statements by the Governor of the Bank of Lebanon that the price in effect and announced on the bank’s platform is the reference price that was approved in Budget data, then it began to be applied two months ago in publishing the Central Bank’s budget, and banks were obligated to use it in preparing their periodic budgets.

Adding to the complexities of the file was the failure to use Alternative Circular No. “166,” which allows the depositor to withdraw only $150 in cash, no matter how many accounts he has in one or more banks, in connection with the length of time required to verify that the depositor’s situation conforms to the conditions described, while Circular “158” remains It is valid for the category of depositors who requested to benefit from its effects, which allows holders of dollar accounts documented before the fall of 2019 to withdraw a monthly share of $400 for previously joined members and $300 for new ones.

A concerned senior official confirms that any new setting of the price of dollar withdrawals stuck in banks outside the range of the official rate will automatically lead to continued injustice against depositors by deducting from their savings, and more importantly, hindering the ongoing efforts to establish a unified price for the lira, and the continuation of the unfair price exception is contrary to The first main goal of reforming the monetary path, which is strongly supported by the International Monetary Fund, as a starting point for comprehensive monetary and financial structural reforms, is also in conflict with the principle of justice in fulfilling the rights owed to depositors.

It is likely that, according to these equations, raising the allowance from 15 to 25 or 30 thousand liras to the dollar will be ignored, while the total taxes, fees, and public service allowances will be collected at a price of 89.5 thousand liras. Therefore, it is expected that the decision of the Council of Ministers, according to the concerned official, whether through an executive decision or a legislative proposal in the form of a “repeated accelerator”, will be based on adherence to the price announced on the Central Bank platform, accompanied by setting maximum ceilings for withdrawals, so that they do not exceed the specified amount of 24 million liras. Previously, or replace it with $250 in cash to become the closest to the share of beneficiaries of Circular “158”.

The main problem, according to the Central Bank governor’s description, is that there are deposits worth $88 billion, in addition to deposits in lira. On the other hand, the banks have deposits with the Bank of Lebanon in close numbers, and the state borrowed and disbursed these funds. Regardless of who will bear the greatest responsibility for these deposits, the state or the banks, what is most important is developing a clear plan for the appropriate mechanism to emerge from the crisis, and how responsibilities can be distributed later.
The governor said in his intervention during a meeting with bankers and businessmen: “We do not speak clearly to depositors that returning their money is a path; Because they are in the banks, and if we cannot preserve the latter, not only the depositors’ money will evaporate, but also the economy. Because no economy can be built without a sound banking sector.”

According to these concepts, returning deposits is a prerequisite for maintaining the banking sector, which in turn is a prerequisite for preserving and building the Lebanese economy. According to Mansouri, we must “treat deposits with the same methodology that we followed when unifying the exchange rate.” As for withdrawals, the Council of Ministers is moving to set a number for withdrawals, and it will need a law issued by the House of Representatives. Therefore, the Bank of Lebanon is not concerned with re-fixing the exchange rate for withdrawals. When a new exchange rate is set for withdrawing deposits, this practically means “heraks” to them, and this requires a law.”