Lebanon received an extension of a time limit extending for several weeks, in order to complete some legislative and procedural tasks that are indirectly in line with the observations of the “International Monetary Fund” regarding the draft financial regulation and deposit recovery law. This aims to ensure that the level of reform progress is classified as “adequate,” as a preliminary step to renewing an initial financing agreement with the Fund in the spring of next year.
According to what was published by Asharq Al-Awsat, the grace period has been increased to set an initial date for the next round in the first half of next April, with the aim of monitoring the extent of compliance with the recommendations that were presented and discussed during the round of investigation of reform updates. This tour was carried out by the Fund’s delegation in Beirut over a week that witnessed intense discussions with senior officials in the executive, legislative and monetary authorities, in addition to sectoral bodies. The joint assessment is scheduled to be drawn up at central administrative levels during the participation of the official financial delegation in the regular meetings of the Fund and the World Bank, scheduled to be held in late April in Washington.
A new “flexibility” was observed in the way the mission dealt, and it is hoped, according to a concerned official and participant, that it will contribute to gradually containing the problems and points of disagreement, by reaching flexible understandings that establish a relative balance equation in distributing the burdens of the financial gap, which exceeds 80 billion dollars.
This is based on ensuring the maximum possible limits for depositors’ rights, and holding the state responsible for correcting the gross imbalance in the Central Bank’s budget, as a result of its resort to open financing through the investments of its banking system. These investments are equivalent, in terms of size, to estimates of the gap and the total deposits of depositors with banks.
The international organization actually noted the positive progress achieved, while confirming its classification as “insufficient” to reach the point of concluding the agreement, pending the issuance of the legislation in its final form. The “Financial Stability and Restoration of Depositors’ Rights Project,” which was recently approved by the Council of Ministers, represents a first step towards rehabilitating the banking sector and granting depositors gradual access to their deposits, according to conclusions reported on the Fund’s official page. The mission, headed by Ernesto Ramirez Rigo, received official pledges to accelerate the completion of legislation in the House of Representatives and its committees, within a maximum deadline of the end of next month.
According to the approach presented by the Fund in its recommendations, it must be ensured that the priority order of claims is respected, and that any losses must be avoided on depositors before they are charged to shareholders or lower-ranking creditors. It also requires rebuilding a viable banking system that serves current and future generations. Accordingly, the bank restructuring process should be consistent with the level of liquidity available in the system, allowing the provision of the necessary resources for the gradual release of deposits, while ensuring that the contributions required from the state do not undermine efforts to restore the sustainability of public debt.
