The World Bank said that assertions by Lebanese politicians that deposits kept in the country’s collapsed banking sector are sacred are ‘cruel’ because they ‘flagrantly contradict the reality.’
“Not only does it flagrantly contradict reality, but it also prevents solutions to protect most, if not all small and medium depositors, in dollars and in cash,” the report said.
Lebanon has for three years been in a severe financial crisis, said to have left eight in ten people poor. The World Bank calls it one of the three worst financial crises in modern times.
In a report released Tuesday, August 2, the World Bank issued: “Political slogans for the sacrosanct of deposits are hollow and opportunistic; in fact, the constant abuse of the term by politicians is cruel.”
The report notes that bank shareholders and large creditors “have profited greatly over these 30 years from a very unequal economic model,” noting losses in the financial sector, estimated by the government at more than $70 billion, which should have been accepted at the beginning of the crisis.
The report even explores the possibility of whether the country’s economic model for the last 30 years amounted to a Ponzi scheme, which is a type of investment scam that secures returns for investors with money taken from new investors.
“Lebanon’s depression – deliberate in the making over the past 30 years – has hollowed out the state of the provision of basic services to its citizens,” the report adds.
“The successive shocks that hit Lebanon since 2019 affected both the supply and demand sides in critical sectors. The crisis revealed the fragility of Lebanon’s service provision model, itself a product of elite capture of State’s resources for private gains.”
“The weakening of public service delivery was therefore a conscious effort made to benefit the very few at the expense of the Lebanese people. Citizens end up double paying and receiving low-quality products or services,” it said.
“The impact is also highly regressive as it affects middle- and lower-income groups much more significantly.”