The Lebanese parliament failed to convene and vote on the “Capital Control” law due to the boycott by certain parliamentary blocks. This legislation is considered a pivotal prerequisite for securing an International Monetary Fund (IMF) deal.
LIMS argued that the efficacy of the capital control law would have been far more impactful if enacted at the outset of the crisis. Back then, Lebanon’s Central Bank held approximately $35 billion in reserves, against a backdrop of approximately $100 billion in deposits. Such a law could have ensured an equitable distribution of the remaining resources among depositors. Unfortunately, the opportunity slipped away, enabling well-connected depositors to transfer their assets abroad, while everyday savers found their funds trapped within the confines of local banks. Today, both the Central Bank and the government continue to erode these dwindling reserves through various financial maneuvers. These include disbursements in dollars to public sector employees, subsidies to the national electricity company for fuel procurement, and the subsidization of medicine imports.
LIMS underscored that the primary objective of this legislation has shifted over time. It is no longer a bulwark protecting the remnants of depositors’ funds. Instead, it primarily serves as a framework to govern withdrawals and potentially harmonize official exchange rates. Regrettably, the law’s current version offers scant protection to the remaining depositors’ funds, as both the central bank and the government retain the latitude to further deplete these resources via sundry schemes, while rightful owners face insurmountable barriers in accessing their own assets.
Instead of imposing restrictive controls, LIMS advocates for an alternative approach—a judicious distribution of the remaining funds to depositors up to a predetermined limit. Such a measure would safeguard against wasteful expenditure providing a more equitable resolution to this financial quagmire. As Lebanon grapples with its economic tumult, the imperative for pragmatic solutions becomes ever more pressing.
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