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Since the start of Lebanon’s financial woes at the end of 2019, the government has proposed several measures to address the liquidity crisis in banks. Yet all the suggested measures signify blatant infringements on the financial assets and deposits of individuals as well as those of institutions. This means there is a possibility that measures, if adopted, will trigger judicial procedures. Such court action might arise from Lebanese expatriates and it could also harm relations with the countries where these expatriates reside, including in the Gulf and European nations. In another flaw, the plan does not address the fate of deposits in Lebanese pounds and the huge losses incurred.
The economic impact of this measure will be devastating; depleting citizen’s purchasing power, alongside the lost trust in the state and the banking system. There are simple alternatives to this that are useful and confidence-building in the economy. The most important of which is the complete liberalization of the exchange rate, which in turn will contribute to reducing the deficit, which must be reduced to the lowest levels in the first year, and then move towards balance afterwards. Public sector debts, as well as the assets and liabilities of banks must be rescheduled based on the practices that prevailed before the crisis. This will allow deposit holders to withdraw from their deposits in dollars or in pounds from dollar accounts on the free currency rate if the dollar is not available in sufficient quantity.
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