The Lebanese government has been borrowing depositors money from the banking system for years and spent it on government expenditure, infrastructure projects. Today they don’t have the money to pay the depositors back. Since the central bank and banks hold around 80% of public debt by subscribing in treasury bonds on in CDs issued by the central bank, they are the main loser after Lebanon’s default on bond holders, making their clients pay the bill. They have been supplying people’s money in Lebanese pounds thus increasing monetary mass which causes higher inflation and a sharp devaluation of the Lebanese pound on the black market.
Dr. Patrick Mardini highlighted the fact that Lebanon needs a lot of unpopular reforms like cutting the wage bill of employees, cut spending massively, some privatization, some devaluation of the Lebanese pound. The IMF intervention would help impose these reforms, he added.
Dr. Mardini’s Interview on Al Jazeera News on April 28, 2020.