Lebanon reverses decision on deposit withdrawals after protests erupt

Lebanese soldiers stand guard as smoke rises from tires set on fire by demonstrators during a protest in Antelias, Lebanon, on June 3, 2021.MOHAMED AZAKIR/Reuters

Lebanon on Thursday reversed a decision to stop withdrawals from dollar deposits at a fixed rate – much lower than the informal market but higher than the official peg – after protests erupted late on Wednesday.

“A decision to regard Circular 151 issued by the central bank (as) still in force has been made,” the presidency said in a statement after a meeting that included central bank chief Riad Salameh.

Salameh told reporters the central bank was not bankrupt and peoples’ deposits were safe and would be returned soon.

Lebanese banks have locked depositors out of their dollar accounts and blocked transfers abroad. But under the circular issued last year depositors were permitted to withdraw dollars, with the funds paid in the local currency at a rate of 3,900 pounds to the greenback.

That is only about a third of the value of dollars on the black market – which on Thursday were traded at around 13,000 pounds to the dollar – but it has been the only way many Lebanese have been able to access their funds.

The official peg is at a rate of 1,500 pounds to the dollar.

Lebanon is in the throes of a deep financial crisis, wrought by endemic corruption and mismanagement, that is threatening its stability and is described by the World Bank as one of the deepest depressions in modern history.

In a report this week, the World bank predicted that Lebanon’s gross domestic product, which has already shrunk from $55-billion in 2018 to an estimated $33-billion last year, would contract by a further 9.5 per cent in 2021.

The World Bank added that the crisis was being aggravated by a “debilitating institutional void” caused by political deadlock.

The late night Wednesday decision to stop the withdrawals had sparked protests as demonstrators in Beirut blocked roads with burning tires and people lined up in front of ATMs to withdraw cash before the regulation took effect.

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