Beirut, Lebanon – Members of professional syndicates and anti-establishment political parties gathered outside the Beirut headquarters of Lebanon’s commercial banks’ lobby last month to take a stand against a policy that has haunted savers in the country since it plunged into a financial and economic crisis over two years ago – lirafication.
“Lirafication” describes a policy that would allow commercial banks to return depositors’ funds currently locked in United States dollar savings accounts in Lebanese pounds, also known here as lira. Depositors now fear that Lebanon will incorporate lirafication into its economic recovery plan with the International Monetary Fund to bail out the country’s insolvent banks.
“This will take us to hyperinflation,” said Hassan Moughnieh, who leads the Association of Depositors in Lebanon. “This is very bad for the Lebanese economy.”
Such concerns may be well-founded. Lebanon plans on returning less than a quarter of some $109bn in trapped US dollar deposits in its recovery plan, according to a Reuters News Agency report. Several officials involved in drafting the plan have declined to comment about the matter to Al Jazeera.
Ad hoc lirafication has been happening since the country first started sliding into crisis in August 2019, when Lebanon’s banks began to withhold deposits in US dollar accounts.
Currently, depositors can withdraw from their dollar accounts in Lebanese pounds – but at an unfavourable exchange rate that wipes out 70 percent of the market value of those dollar savings, while helping banks trim their losses and expenses.
In the absence of official capital controls, banks have implemented their own withdrawal limits, making life extremely difficult for millions of Lebanese buckling under soaring inflation and rampant unemployment. READ MORE...
