The plan of the Banque du Liban (BDL) Governor’s deputies to correct monetary policy and initiate financial recovery has faced hurdles until now, especially during the second meeting with the Administration and Justice Committee.
What are the motives behind this plan, its details, and is it feasible?
Regarding the motives, the plan does not differ from the reform laws demanded by the International Monetary Fund (IMF).
However, the BDL Governor’s deputies refuse to continue the current financial policy without reforms. They need laws that hold them accountable, especially since many decisions made in the Council of the BDL in the past were signed with reservations to protect themselves from legal repercussions.
As for the provisions, unlike the previous policy of procrastination, the plan sets a specific timeline for implementation.
The first step of the plan is to adopt the 2023 budget in August, but with a review of the current government’s version, and correct the revenue numbers by raising it from the current $2 billion per year to $3 billion. This is based on the World Bank’s request to increase tax revenues to 15% of the GDP to stimulate growth and reduce poverty.
The plan also grants an additional month to reconsider and approve the Capital Control Law, pending between the government and parliament for over three years. This law is crucial to protect the remaining bank deposits and stop any discretion.
Additionally, the plan obliges the government to submit bills to parliament for approval within two months, including a financial balance law that outlines the mechanism for depositors to reclaim their funds instead of the current circulars.
Another critical law to be addressed is the bank restructuring law to determine which banks can survive and how to increase their capital.
The most sensitive point of the plan is to start implementing the liberalization of the exchange rate by the end of September in a managed manner. This involves stopping Sayrafa to stop the depletion of reserves and replacing them with an international platform reflecting the market rate.
The plan requires the parliament to pass a law allowing the BDL to lend the government from its mandatory reserves an amount not exceeding $200 million per month for six months to protect vulnerable groups affected by the exchange rate hike and to support the public sector. The government must commit to repaying these funds.
The four deputies’ plan has quickly drawn criticism and rejection from various parliamentary blocs, considering it unfeasible and arguing that the government should bear primary responsibility instead of shifting it to the MPs.
In return, the BDL Governor’s deputies call for cooperation between the BDL, the government, and the parliament until they handle their responsibilities.
Otherwise, the option of resignation is on the table in the upcoming days unless actions succeed in dissuading them due to the legal and financial risks associated with such a move.