On January 14th Lebanese President Michel Aoun addressed the nation saying that there are obstacles which are hindering the formation of the new government which was expected to take place last week.
Aoun pointed out that Lebanon is paying the price of 30 years of wrong financial policies as it relied on loans and debt at the expense of production. This is in addition to long decades of corruption and mismanagement.
The Lebanese president believes that the ongoing conflicts in Lebanon’s neighbouring countries are adding to the country’s economic crisis by limiting Lebanon’s vital supply and export markets, thus creating the severest financial crisis on top of an already exhausted economy.
Aoun’s address coincided with demonstrators returning to streets after several weeks of relative calm in what they described as the “week of anger” in order to pressure the country’s political elite to speed up with the formation of the new government. University and school students participated in the angry protests, blocking three main roads and causing severe traffic jams in addition to burning tyres, Asharq Al-Awsat reported.
In Beirut, the capital, hundreds demonstrated in front of the Central Bank chanting against its governor’s financial policies. Police had to interfere and disperse protesters. In Tripoli, demonstrators blocked the streets and burnt tyres, meanwhile in Sidon people marched outside governmental offices and banks, thus paralysing the city.
According to Reuters, Lebanon has been suffering for years from poor economic policies since its civil war which took place between 1975-90 due to corruption and mismanagement. Lebanon’s public debt has reached $89.5 billion. In order to alleviate this pressure from Lebanon’s economy and provide it with some air, the debt has to be restructured but without affecting people’s deposits. According to Salim Sfeir, chairman of the Association of Banks in Lebanon, the bank is working on restructuring the debt so that the foreign loans will be repaid, and the country’s economy will not be harmed.
The restructuring, according to Sfeir, would be the new government’s responsibility. In general, it will decrease interest rates and prolong maturities. Restructuring means working on (maturity) time and interest rates, not mean surgical operations, Sfeir said while explaining that he is against formalisation of banking controls, as it would be hard to return to normal practice.
Since the eruption of protests on October 17th, banks have been tightening measures of customers’ access to their deposits as well as banning all transfers abroad except in very limited circumstances.
A few days ago, Central Bank governor Riad Salameh sent a letter to Lebanon’s caretaker finance minister Ali Hassan Khalil, telling him that measures imposed by commercial banks must be regulated and unified in order to implement them fairly for all depositors and clients.
This would be for the welfare of the banking sector which would secure public good will, protect banking and monetary stability as well as provide for the legitimate interests of customers. Whereas, the current situation, according to Salama, has led to prejudicing the rights of some customers on the account of others, reported Reuters.