A man wearing a face mask takes Lebanese lira banknotes at a currency exchange shop in Beirut. (Credit: Mohamed Azakir/Reuters)
BEIRUT — The Lebanese lira dropped below LL26,000 to the US dollar on the parallel market Wednesday after discussions of the capital control draft law at parliamentary committee level came to a standstill. A government plan for economic recovery that was leaked yesterday reshuffled MPs’ expectations of approving the capital control law before legislative elections in mid-May.
Here’s what we know:
• In a press conference after a parliamentary joint committee meeting dedicated to the discussion of the capital control draft law, Deputy Speaker Elie Ferzli said even though quorum was achieved, the revelation of the leaked plan changed the gathered MPs’ priorities, and the session turned towards discussing the rights of the depositors. According to Ferzli, after the revelation of the leaked plan, there was a unanimous agreement among present MPs to defer the discussions of the capital control law until after the government explains its intentions regarding the economic plan and the fate of depositors’ money.
• Several MPs expressed complete surprise about the leaked plan and asked how it is that they repeatedly hear about critical government policies from social media and journalists.
• Some expressed their skepticism about the “fortuitous” timing of the leak, and about the party who would stand to benefit the most from a delay in the approval of a capital control law. MP Ali Fayyad (Hezbollah/Marjayoun-Hasbaya) claimed that some political parties are using the issue of capital control and the government’s plan in a populist bid. However, MPs agreed that discussing critical policies and laws before parliamentary elections is not best practice.
• Most of the MPs L’Orient Today talked to criticized the government’s plan and referenced the part in the leaked document that mentions that only accounts of $100,000 and below will be preserved and any balance above that amount will be converted to shares in banks, partly converted to lira and partly written off. They stated that all the depositors irrespective of the size of their account should be treated fairly and equally.
• Following the meeting, Prime Minister Najib Mikati said that he now has sent a copy of the economic recovery plan to Parliament.
• There was wide expectation among experts that the capital control draft law would be finalized today or that at minimum discussions would be in their final stages before the draft law was sent to the general assembly to be voted on.
• Delays in approving and implementing a capital control law would push back the disbursements of part of the $3 billion earmarked by the International Monetary Fund to assist Lebanon. Continued delays would further erode the country’s ability in the short and medium term to finance its foreign currency requirements.
• Recent developments have shown that the central bank continues to delay paying importers from its foreign currency liquidity, forcing the government to start using part of its Special Drawing Rights to finance the import of several basic goods, such as wheat and medications.