Confidence is not something you can buy. Or summon. In Lebanon nowadays, confidence won’t be restored without the right men in the right position at the right time. This looks like one of the main problems in the country.
Lebanese President Michel Aoun is not the man in charge anymore, but still, he’s supposed to “hold discussions” on Thursday 28 to form a new Cabinet. As Parliament speaker Nabih Berry made it crystal clear yesterday, the agonizing regime won’t accept a “purely technocrat Cabinet” as the protestors ask for the past five weeks of protests, fueled by anger at corruption among sectarian politicians who have governed for decades. Demonstrators want to see the entire ruling class gone from power.
Despite the unprecedented protests, which led to the resignation of Prime Minister Saad al-Hariri on Oct. 29 and exacerbated the economic crisis, deeply divided politicians have yet to agree on a new government.
The Lebanese Economic Bodies group, which includes industrialists and bankers, called for the closure of private institutions from Thursday 28 to Saturday 30 to push major parties to form a new government and avert further economic damage.
“The political forces have not assumed their national responsibilities and have not shown the seriousness necessary to produce solutions to the current crisis,” it said.
Banks reopened last week after mostly being shut since unrest began on Oct. 17. Fearing capital flight and amid a hard currency shortage, commercial banks have placed tight restrictions on withdrawals and transfers abroad.
It was not clear if any banks would heed the strike call. The hard currency shortage has spawned a black market where the price for dollars has surged since the start of unrest, reaching over 2,000 pounds to the dollar on Monday, about a third higher than the pegged rate of 1,507.5.
In its statement, the Economic Bodies group said its “escalation” would continue until a new government was formed, with further steps to be announced. The strike call came hours after clashes on a Beirut roadway between supporters of Shi’ite groups Hezbollah and Amal and anti-government protesters, raising the specter of violence in protests that have been overwhelmingly peaceful, and just a few hours before Bikfaya’s incidents on Tuesday evening with FPM supporters throwing stones to local Kataeb supporters and residents.
Private banks: depositor concern grows
Controls imposed by Lebanese banks on access to cash are fueling concern among depositors who are worried for their savings despite government assurances they are safe from the worst financial crisis since the 1975-90 civil war.
Protests that have swept Lebanon since Oct. 17 have added to pressures in the financial system, deepening a hard currency crunch that has left many importers unable to bring in goods, forced up prices and increased fears of financial collapse.
The banks’ response – tight withdrawal limits for hard currency and blocks on nearly all transfers abroad – has plunged many savers into deep uncertainty.
“There is concern, great concern: that if I have saved my whole life to get an amount and put it here, where will it go?” said Munir Faqih, a 66-year-old retiree whose hard currency savings are the fruit of 17 years working abroad.
“We are in a big crisis and I am very concerned for my savings,” he said.
The head of banking association, in a Reuters interview last week, described the controls as “a fence to protect the system” until the situation returns to normal. The central bank has said deposits are safe.
But concern is widespread. The dollar withdrawal curbs have been steadily tightened since they were first applied at the start of November.
Blom Bank, one of Lebanon’s largest, has gradually lowered its weekly withdrawal ceiling from $2,500 to $500 this week for depositors with less than $100,000 in their accounts. At Bank Audi, the limit is $300.
The crisis has shaken confidence in a banking system that has been a cornerstone of Lebanon’s post-war stability.
The banks’ role has been critical to the system by sucking in dollars from Lebanon’s large Diaspora and recycling them to finance the heavily indebted state and Lebanon’s trade deficit.
With the country’s fractious sectarian leadership yet to name a new premier since protests prompted Saad al-Hariri to quit on Oct. 29, delaying reforms it needs to pull the economy from crisis, depositors worry their money is no longer safe.
“I don’t believe in the government when they say my money is safe in the banks because they’re not credible. This is something we’ve discovered,” said a saver who gave his name has Michel and is worried that seven years of savings made while working in Africa are now stuck.
“People are withdrawing cash every week, as much as the bank is ready to give them,” said Marwan Mikhael, head of research at Blominvest Bank.
“The problem is the banks do not know how long this crisis will stretch, so they have to bear in mind that they want to keep going for the maximum time possible.”
Some depositors said they would pull their remaining savings if only they could and regret not having done so already.
“We are completely lost. I don’t know what is safe and what is not safe,” said Antoine Bouez, 42, who works in financial services. Bouez said the $500 weekly limit hardly meets his needs.
The protests, fueled by rage against a ruling class seen as looting Lebanon, have slowed an already weak economy. Many businesses have shed jobs or slashed salaries and moved workers onto part time.
Those seeking dollars must rely on an increasingly expensive parallel market, where the Lebanese pound’s value was around 40% weaker than its official rate on Tuesday.
Straddled with one of the world’s highest public debt levels, Lebanon’s foreign currency reserves are set to come under further pressure this week with the repayment of a $1.5 billion Eurobond.
“The bank is making you feel like you are begging for your own money. I doubt that Lebanese will return to put their money in the banks,” said a depositor who was forced to prove that his $1,000 withdrawal was needed to buy medicine for his mother. Restoring confidence between public and private sectors, restoring confidence between private banks and depositors, will be the task #1 of the next Prime minister. But in Beirut these days, this is like a guessing game: nobody really wants the job, and no one wants the rare politicians who picture themselves in charge.