Lebanon Will Finally Ease Capital Control

Riad Salameh announced in a TV interview that capital control measures will be eased starting from June. This means that people will finally be able to freely use their own money. 

The restrictions imposed by the banks on outbound transfers, meaning transfers made outside of the country, will also be lifted.

Salameh said that the Central Bank (BDL) had previously asked the back-then Ministry of Finance and caretaker Prime Minister, on Oct 28th, to give it the green light to regulate the existing bank restrictions.

They will issue a circular in this regard if it gets the approval. Furthermore, there would be no haircuts on deposits as that would require a new law and they don’t have the right to do so. 

Salameh claimed that the exchange value of the LBP will remain stable as this is a state policy. He added that the stability of the currency costs less to the economy than a floating rate that will cause high inflation.

Most of the banks have started the process of increasing their capital through cash contributions. The capital increase must be completed by June 2020, Salameh added.

BDL promised that it will continue to provide dollars and Lebanese pounds to help the banks meet the needs of their customers, with the amount of dollars that the Central Bank can use being $31 billion. 

As explained by Salameh, the banks are shipping between $300 and $400 million of banknotes to Lebanon every month to meet the people’s demand.

Salameh also revealed that, between September and November, the amount of deposited money declined by $10.1 billion. $4.5 billion was used to settle loans, and $3 billion was used to withdraw Lebanese pounds and dollars. 

He said that BDL has asked the banks to be flexible regarding loans (including housing loans) and that the Banking Control Commission will not rate these loans until the situation improves.