A potester sprays Arabic graffiti which reads "Depositors Cry Association" as angry Lebanese vandalized banks in Beirut on Feb. 16, 2023, one day after the Lebanese lira hit a record low against the dollar on the black market. (Credit: Joseph Eid/AFP)
BEIRUT — Lebanon's commercial banks do not have enough liquidity to pay back depositors, the secretary general of the country's banking association said on Wednesday in a letter that laid out the banks' positions.
The letter was signed by the Association of the Banks of Lebanon (ABL)'s Fadi Khalaf and served as the introduction to the ABL's monthly report. Khalaf said it represented his "opinion and personal analysis."
The letter said commercial banks had approximately $86.6 billion deposited at Lebanon's central bank as of mid-February, and a net negative position with correspondent banks of $204 million as of Jan. 31, 2023.
"These numbers show without a doubt that the banks have no liquidity," Khalaf wrote.
Lebanon has been in the throes of a financial meltdown that has cost the local currency more than 98 percent of its value and pushed more than 80% of the population below the poverty line.
The crisis erupted in 2019, following decades of corrupt government, profligate spending and financial mismanagement, and saw banks impose restrictions on withdrawals and transfers although a capital controls law had not been adopted.
That sparked snowballing anger against the financial institutions, but the banks say the policies of the state and the central bank are to blame.
Lebanon's caretaker Deputy Prime Minister Saade Chami, the architect behind the country's stalled recovery roadmap, told Reuters last year that banks should "go first" in absorbing the losses stemming from the financial sector. Those losses are estimated at around $72 billion.
Lebanon is working to address the crisis through talks with the International Monetary Fund to gain access to $3 billion that could kickstart the economy.
But the IMF said last year that Lebanon's progress in implementing required reforms remained "very slow," with the bulk yet to be carried out.