Political and banking alliance send deposits restructuration scheme to void

The government project for the “Restructuration Of Banking Deposits And Restructuring The Financial Sector” seems to have taken a severe blow following a sustained lobby from the Association of Banks of Lebanon (ABL) and their political stooges’ allies

Lately the World Bank blasted Lebanon's ruling class for "orchestrating" one of the world's worst national economic depressions due to their exploitative grip on resources.

The global lender said the nation's elite, opens new tab were still abusing their position despite Lebanon suffering possibly one of the three biggest financial crashes globally since the 1850s.

"Lebanon's deliberate depression is orchestrated by the country's elite that has long captured the state and lived off its economic rents," the World Bank said in a press release attached to a report on the Lebanese economy, opens new tab."It has come to threaten the country's long-term stability and social peace," the released added, echoing public sentiments that have prompted angry protests in recent years.

Fuelled by massive debt and the unsustainable way it was financed, the crisis has slashed Lebanon's gross domestic product (GDP) by 58.1% since 2019, plummeting to an estimated $21.8 billion in 2021, the World Bank said.

Already one of the most unequal countries, millions more have been pushed into poverty. The World Bank expected those below the poverty line to have risen by as much as 28 percentage points by the end of 2021, after an increase of 13 percentage points in 2020.Government revenues collapsed by almost half in 2021 to reach 6.6% of GDP: the lowest ratio globally after Somalia and Yemen, the bank said.

Real GDP is estimated to have declined by 10.5% last year, according to the report, while gross debt is estimated to have reached 183% percent of GDP, a ratio only exceeded by Japan, Sudan and Greece. "Deliberate denial during deliberate depression is creating long-lasting scars on the economy and society," said Saroj Kumar Jha, the World Bank's regional director of the Mashreq. The crisis has caused massive losses in the financial system, estimated by the government in December at $69 billion.

"Worryingly, key public and private actors continue to resist recognition of these losses, perpetuating the zombie-like state of the economy," the World Bank said.

The nosediving exchange rate - the Lebanese pound has lost more than 90% of its value since 2019 - should have boosted exports. "This did not happen," the World Bank said, hindered by pre-crisis economic fundamentals, global conditions and the institutional environment.Standard & Poor’s Global Ratings (S&P), the international rating agency, affirmed on February 16, 2024 Lebanon’s long and short-term foreign currency (FC) ratings at “SD”, and the long and short-term local currency (LC) ratings at “CC” and “C” respectively. The outlook for LC debt is still negative, portraying the likelihood that the Lebanese Government may opt to restructure its local currency debt. The rating agency mentioned that the reforms’ implementation that could prompt economic recovery continue to stall amid the continued political bickering. The agency also stated that presidential elections have not yet been concluded even after the 12 electoral sessions that were held in the Lebanese parliament. In addition, the agency revealed that the caretaker government’s ability to implement the necessary reforms required by the IMF program is limited, commenting that a debt restructuring exercise is unlikely to take place. Furthermore, S&P noted that the war in Gaza, which has raised political tensions and amplified domestic security risks, has exacerbated the challenges that Lebanon is facing since more than four years.