LCP statement on Capital Control: Lift restrictions on the accounts of small depositors
the Lebanese Communist Party has thoroughly examined the draft law and highlights the following remarks:
1- Instead of holding the Central Bank accountable for its monetary and fiscal policies, the government tends to provide the latter with exclusive prerogatives claiming it would be temporary and would last for only three years. Ironically, any economic plan to reform the Lebanese economy will be carried out in no less than a three-month timeframe. Consequently, LCP questions this measure, especially since the Central Bank is directly responsible for the financial engineering plan which was put forward in 2016 and has resulted in catastrophic effects on the national economy.
2- The so-called “Capital Control draft law” was developed before the announcement of the government’s macro plan of economy reformation, which the government has promised to finalize in the upcoming few weeks. In conclusion, the content of any plan produced by the government would be similar to the “Capital Control draft law” and re-affirms our position towards the newly formed government; it is the cabinet that protects the interests of crony capitalists, especially those in the banking sector.
3- Even though the draft law allows access to deposit and withdraw the “new money”, foreign currency which has been flowing to the country after November 17, it keeps the restrictions on the already existing deposits in foreign currency (which amounts to 120 billion dollars). The draft law states that the Central Bank, and in coordination with the Minister of Finance and the Association of Banks in Lebanon, will issue circulars that govern such procedures without mentioning when will these circulars be issued. Moreover, the ceiling of money withdrawal of different bank cards, whether used in Lebanon or abroad, will be set differently as per each bank regulation.
4- The draft law kept some exceptions in regards to money transfer, especially transactions related to hospitalization, education, taxations, and pocket money. However, most of these exceptions are subject to limitations placed by the banks, whether it relates to the maximum amount of allowed money transfer or to the following condition: “depositors should not have any bank account outside Lebanon”. Regarding this, the government didn’t take into consideration that many Lebanese citizens already have bank accounts in foreign countries they reside in. Thus, instead of exceptions constituting positive elements in the draft law, said exceptions turn out to be negative elements leading to restrictions on the capital flow.
5- What is more alarming in the draft law, is one of the articles stating that “each bank should reserve no less than 0.5 % of its total deposits to finance the import of essential food items, and raw materials needed for agriculture, industry, information technology, etc.”. Knowing that the book value, of current bank deposits, amounts to 160 billion bounds, then this means that funds allocated to import essential goods and services are 800 million dollars; this amount constitutes only 4 % of Lebanon’s imports and 5 % if the imports included fuel resources, medicines, and wheat (three essential commodities that Lebanon heavily relies on and it is usually the responsibility of the Central Bank to organize these credits). As a result, this would lead to the inability of the economy to import the goods and services; therefore, resulting in low levels of economic growth rates and an increase in the US Dollar exchange rate to the Lebanese Pound.
Based on the above remarks, the Lebanese Communist Party considers that the country’s ruling elites continue to put restrictions on the bank depositors, especially small depositors. Through adopting such measures, the financial elites, along with their representatives in the government, are threatening the status of these deposits. The daily struggle of these small depositors to meet living needs is forcing them to transfer their cash to Lebanese Pound based on the official exchange rate. During this process, depositors are losing the value of their money in an “indirect haircut “. Our Party considers that the measures stated in the “Capital Control draft law” are discriminatory measures because they highly differentiate between the large and the small depositors. This draft law, if approved and ratified, will intensify the inequality and wealth gap in a country that witnesses a huge income gap among its inhabitants. Our Party calls to adopt measures that would guarantee social equality, such as introducing progressive taxation, increasing taxations on bank deposits proportional to its amount, and taxing profitable companies. Finally, the Lebanese Communist Party considers that the current government policies prove to us- as to many Lebanese- that it is a non-credible government and this is a major reason why forces and groups of the October 17 uprising should continue their fight in escalation against it to achieve the full aspirations of the Lebanese people.
Political Bureau of the Lebanese Communist Party
March 24, 2020
