SAWT BEIRUT INTERNATIONAL

| 29 March 2024, Friday |

Capital control is necessary as long as it protects depositors’ funds

The Capital Control Law is one of the most important laws that must be approved by the International Monetary Fund and other international financial and economic institutions as part of the economic reform plan.

As a result, we have seen the Lebanese government’s interest in this law in recent days.

It prepared a draft law, presented it to the Fund and a number of donors, and referred it to Parliament for approval; however, this law sparked widespread controversy within the Parliament during the joint committees session, as they believed it contained gaps that could not be accepted, emphasizing the need to pass the law according to a formula that preserves depositors’ money.

The new “Capital Control” proposal calls for the formation of a committee comprised of Banque Du Liban Governor Riad Salameh, Finance Minister Youssef Khalil, and current Prime Minister Najib Mikati, with Economy Minister Amin Salam proposed as the fourth member.

This committee empowers the Capital Control proposal to “make customary provisions” against any bank account holder, new or old. It decides whether to allow or prohibit transfers.

It decides on bank withdrawals and creates a “blocking” mechanism on depositors’ funds, and it does whatever it wants without any restraint or impediment.

The Banking Control Commission is required to monitor the committee’s work under the new Capital Control proposal (composed of Salameh, Mikati, and the Minister of Finance and Economy).

In this context, Dr. Mahmoud Jebai, an economic expert, stated in an interview with Sawt Beirut International that the Capital Control Law is necessary if it is organized within a comprehensive and clear vision that establishes and preserves rights and returns depositors’ money.

While he considered this law to be necessary in order to organize the withdrawal process, restore confidence in dealing with the banking sector, and protect the remaining depositors’ money, he believed that it should not be applied to depositors who paid a high price in the previous period as a result of their loss of more than 75% of their deposits given the heretics imposed by the circulars issued by the Banque du Liban.

He cautioned against approving the Capital Control in accordance with the proposed formula, which grants exceptional authority to a specific committee with the authority to make decisions for a period of five years, deeming this matter unfair to depositors. For five years, there has been no clear vision of the future.

He ruled out the possibility of this bill passing in the Parliament, especially so close to the parliamentary elections.

In turn, economist Patrick Mardini stated in an interview with Sawt Beirut International that passing the Capital Control Law through (smuggling) is impossible because this law must be part of a settlement and a comprehensive vision that protects depositors’ rights.

Noting that if the government wanted to pass the Capital Control to protect banks from lawsuits, he believed that a law must be issued at the same time that preserves what remains of foreign currency reserves in the Banque du Liban, i.e. depositors’ money, and also protects the purchasing power of the Lebanese pound, and this law was passed. The monetary board is what it’s called.

He thought it was illogical for Capital Control to be implemented without the approval of the Monetary Council, emphasizing that reserves, depositors’ money, and the purchasing power of the Lebanese pound must be preserved by establishing the Monetary Council concurrently with Capital Control.

    Source:
  • Sawt Beirut International