The Association of Banks in Lebanon (ABL) on Tuesday rejected a financial recovery road map adopted by the Lebanese government for a second time, drawing a sharp rebuke from the Cabinet.
On the same day, the local currency dropped to a record low of 34,000 Lebanese pounds against the US dollar, meaning it has lost 95 per cent of its value compared to pre-crisis levels.
The ABL and successive governments have disagreed for more than two years about how to address the country’s financial meltdown. The disagreements have held up vital reforms and talks on an IMF bailout.
In the absence of decision-making, small depositors have suffered the brunt of the losses. About three quarters of the population have slid into poverty, according to the UN.
How did Lebanon get here and what caused the country's financial crisis?
How did it all start?
In the summer of 2019, depositors with important cash-flow needs, such as goods importers, reported that they were struggling to withdraw large amounts of dollars from banks.
This had never happened, even during Lebanon's civil war between 1975 and 1990.
For years, people have used dollars and Lebanese pounds interchangeably and Lebanon prided itself on its strong banking sector, which allowed for banking secrecy and attracted foreign depositors thanks to its high interest rates.
But as dollars dried up, the local currency started to slowly slip for the first time since the central bank, the Banque du Liban, and the government pegged it to the dollar in 1997 at the rate of 1,507.5 Lebanese pounds to the greenback.
On its website, the BDL still lists this official exchange rate but in practice, it is not used by anyone except for some transactions involving the state, such as tax payments.
Banks offer a different rate — if they give out dollars to depositors at all — and at currency exchanges, the rates are trading at up to 34,000 Lebanese pounds to the dollar.
In October 2019, banks closed for two weeks as nationwide protests erupted after a minister suggested taxing WhatsApp, a mobile phone application that is popular for its free messages and calls.
When banks reopened on November 1, 2019, they introduced capital controls and banned transfers outside Lebanon. These measures were, and remain, illegal because Parliament did not approve them.
People with accounts in dollars can only withdraw a fraction of their money. If they close their account, banks issue them a check that they could use at other Lebanese banks, which also implemented capital controls.
Depositors with accounts in Lebanese pounds can withdraw most of their cash, but it is now worth around 20 times less than it was three years ago.
The first plan under Hassan Diab
In March 2020, Prime Minister Hassan Diab announced the first sovereign default in Lebanon's history as he said the country could not repay $1.2 billion owed to creditors on time.
Mr Diab said that Lebanon needed these funds because foreign currency reserves had dropped to “worrying and dangerous levels”.
The government then approved a financial recovery plan prepared with the help of US investment bank Lazard.
The plan evaluated Lebanon’s losses at $69bn, equal at the time to 271 trillion Lebanese pounds, including $44bn of combined net losses between the Banque du Liban and commercial banks.
The plan was intended to protect most deposits, prioritising small and mid-sized accounts at the expense of large deposits.
A source said all deposits under $500,000 could have been preserved at the time, essentially allowing many Lebanese to be spared the worst of the crisis.
Owners of large deposits were to be offered different options, including converting part of their deposits into capital in the bank.
These large depositors were considered to have benefitted from “excessive interest income”, which sources say could go as high as 15 per cent to 20 per cent.
This proposal, called the “Lazard plan”, was supposed to be a basis for negotiations with the IMF for a bailout package.
On May 1, Mr Diab signed a request for assistance from the IMF.
ABL and Parliament kill the Diab plan
But on the same day, the ABL called on Parliament to reject the plan. The ABL said that it was “biased at the expense of the banks” and blamed the state for mismanaging the money that banks lent it.
A few weeks later, the ABL presented an alternative proposal that suggested that the government should sell $40 billion worth of public assets.
Later asked by local daily L’Orient Today how they came up with that figure, the ABL said “there was no study, it was [just] a valuation”.
The ABL was supported by a parliamentary fact-finding committee that included representatives of all major political parties.
This state of denial, if it continues, will make everyone regret their actions
Deputy Prime Minister Saadeh Al Shami
In addition to its chairman, Ibrahim Kanaan, from President Michel Aoun’s Free Patriotic Movement, the committee included Nicolas Nahas, who is close to current Prime Minister Najib Mikati, Ali Fayyad from Hezbollah, Yassine Jaber and Ali Hassan Khalil from the Amal Movement, Eddy Abi Lamaa from the Lebanese Forces and Faysal Sayeg from the Progressive Socialist Party.
They calculated that overall losses at between half and a quarter of the Lazard plan.
The Lebanese Centre for Policy Studies, an independent think tank, said that the parliamentary committee had brought the figure down in a number of ways, including by re-evaluating losses for debt maturing after 2027 at the official exchange rate in the “questionable anticipation of a revaluation of the Lebanese pound over time”.
The think tank also reported that the committee weakened the bargaining position of its own government by proposing a lower cut on government debt. Its aim was, reportedly, to allow banks to remain solvent and for them to preserve some of their equity.
Political and financial elites were then united in their opposition to the government’s financial recovery plan.
The think tank explained their hostility by describing the banking sector as “one of the most effective tools of clientelist redistribution and elite integration”.
The IMF told the media at the time that it backed the government’s figures.
Negotiations unravelled. Two members of Lebanon’s negotiating team quit in protest. In July, the IMF suspended discussions with Lebanon.
In August, a devastating blast at Beirut’s port destroyed large parts of the city and killed at least 190 people.
Mr Diab’s government resigned. Its plan was buried. Lebanese politicians took 11 months to agree on his successor, Mr Mikati, who then formed a government in September.
IMF talks restart
A Lebanese team, headed by Deputy Prime Minister Saadeh Al Shami, began to negotiate again with the IMF in January. France sent an adviser from its economy ministry to counsel Mr Al Shami during the discussions.
Mr Al Shami estimated that the country's financial losses stood at about $69bn in December and at $72bn earlier this month.
On April 7, the IMF and Lebanon reached a staff-level agreement. The fund said that it could support Lebanon with the equivalent of about $3bn over four years.
The ABL hailed the agreement as a “crucial first step” towards recovery and urged the banking sector to remain “open to any solution that resolves the crisis”.
But Lebanon must put into effect several difficult reforms before the IMF board meeting in July.
Reforms include a financial sector restructuring that addresses the “large losses” and unifies the country’s numerous exchange rates.
Parliament must approve an “appropriate emergency bank resolution”, reform Lebanon’s bank secrecy law and approve the 2022 budget. However, none of the above has yet to be put into effect.
In April, Parliament was about to vote on a capital control law but backed down in the face of protesters who said that it allowed Lebanese politicians to evade responsibility for the crisis.
A parliamentary election took place on May 15. The new Parliament’s mandate began on May 22. No faction or party won a majority and experts expect it has set the legislature up for further deadlock.
The second government financial recovery plan
On May 20, in one of its final official acts two days before the end of its mandate, Mr Mikati's government approved a new financial recovery plan.
Yet to be released publicly, media reports indicate that the plan calls for an audit of Lebanon’s 14 largest banks. Viable banks would be recapitalised with “significant contributions” from bank shareholders and large depositors.
Reuters reported that the plan would cancel “a large part” of the central bank's foreign currency obligations to commercial banks.
The plan also reportedly states that a full audit of the central bank’s finances should be completed by July and that non-viable banks should be dissolved by November.
Mr Mikati said that deposits under $100,000 would be preserved. This figure, which was not stated in the plan, is five times lower than what the previous government believed was possible in 2020.
Since then, the central bank's reserves have further shrunk. It has been spending about half a million dollars a month to, among other things, support the Lebanese pound. It has about $10 billion left.
It is widely believed that Mr Mikati's now-caretaker government will face difficulties in enacting the reforms requested by the IMF.
Political parties are expected to start the usual back-door negotiations to appoint a new prime minister. This can take months due to Lebanon’s sectarian power-sharing system.
ABL's rejection of the second recovery plan
In a statement issued on Tuesday, the ABL said that it “stood with depositors” in rejecting the Mikati administration's plan.
The ABL wrote that Mr Al Shami's plan “absolved the state and the Banque du Liban of their obligations to pay their debts” to commercial banks.
It also said that deposits had been “cancelled at the stroke of a pen” and derided “genius” experts who did not take heed of the ABL’s alternative plan that calls for a fund that manages state assets.
In a statement released a few hours later, Mr Al Shami's media office said the accusations against the state and the BDL were “baseless” and “false”.
He described the ABL’s statement as a “scandalous attempt at claiming to protect depositors” who had “suffered great harm as a result of bad policies”.
“We are in the middle of negotiations that seek to protect the largest possible number of depositors without burdening the state with additional debt,” said Mr Al Shami.
“This state of denial, if it continues, will make everyone regret their actions.”
Mr Al Shami said that Lebanon would not have access to IMF funds if it failed to adopt the plan.
In theory, ABL’s approval is not necessary for Parliament to pass the Mikati government’s financial recovery plan.
But its personal criticism of Mr Al Shami “suggests there is little political and Cabinet buy-in for this plan”, said financial analyst Mike Azar.
“Like the Lazard plan before it, it is a political orphan supported by a handful of technocrats in the government who may be thrown under the bus. It is looking as if the IMF deal was all theatrics to buy time,” he told The National.
UAE currency: the story behind the money in your pockets
COMPANY%20PROFILE
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Sole survivors
- Cecelia Crocker was on board Northwest Airlines Flight 255 in 1987 when it crashed in Detroit, killing 154 people, including her parents and brother. The plane had hit a light pole on take off
- George Lamson Jr, from Minnesota, was on a Galaxy Airlines flight that crashed in Reno in 1985, killing 68 people. His entire seat was launched out of the plane
- Bahia Bakari, then 12, survived when a Yemenia Airways flight crashed near the Comoros in 2009, killing 152. She was found clinging to wreckage after floating in the ocean for 13 hours.
- Jim Polehinke was the co-pilot and sole survivor of a 2006 Comair flight that crashed in Lexington, Kentucky, killing 49.
Company%20profile
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The five pillars of Islam
The candidates
Dr Ayham Ammora, scientist and business executive
Ali Azeem, business leader
Tony Booth, professor of education
Lord Browne, former BP chief executive
Dr Mohamed El-Erian, economist
Professor Wyn Evans, astrophysicist
Dr Mark Mann, scientist
Gina MIller, anti-Brexit campaigner
Lord Smith, former Cabinet minister
Sandi Toksvig, broadcaster
UAE currency: the story behind the money in your pockets
Killing of Qassem Suleimani
Benefits of first-time home buyers' scheme
- Priority access to new homes from participating developers
- Discounts on sales price of off-plan units
- Flexible payment plans from developers
- Mortgages with better interest rates, faster approval times and reduced fees
- DLD registration fee can be paid through banks or credit cards at zero interest rates
Eyasses squad
Charlie Preston (captain) – goal shooter/ goalkeeper (Dubai College)
Arushi Holt (vice-captain) – wing defence / centre (Jumeriah English Speaking School)
Olivia Petricola (vice-captain) – centre / wing attack (Dubai English Speaking College)
Isabel Affley – goalkeeper / goal defence (Dubai English Speaking College)
Jemma Eley – goal attack / wing attack (Dubai College)
Alana Farrell-Morton – centre / wing / defence / wing attack (Nord Anglia International School)
Molly Fuller – goal attack / wing attack (Dubai College)
Caitlin Gowdy – goal defence / wing defence (Dubai English Speaking College)
Noorulain Hussain – goal defence / wing defence (Dubai College)
Zahra Hussain-Gillani – goal defence / goalkeeper (British School Al Khubairat)
Claire Janssen – goal shooter / goal attack (Jumeriah English Speaking School)
Eliza Petricola – wing attack / centre (Dubai English Speaking College)
The specs
Engine: 1.5-litre turbo
Power: 181hp
Torque: 230Nm
Transmission: 6-speed automatic
Starting price: Dh79,000
On sale: Now
UPI facts
More than 2.2 million Indian tourists arrived in UAE in 2023
More than 3.5 million Indians reside in UAE
Indian tourists can make purchases in UAE using rupee accounts in India through QR-code-based UPI real-time payment systems
Indian residents in UAE can use their non-resident NRO and NRE accounts held in Indian banks linked to a UAE mobile number for UPI transactions
What the law says
Micro-retirement is not a recognised concept or employment status under Federal Decree Law No. 33 of 2021 on the Regulation of Labour Relations (as amended) (UAE Labour Law). As such, it reflects a voluntary work-life balance practice, rather than a recognised legal employment category, according to Dilini Loku, senior associate for law firm Gateley Middle East.
“Some companies may offer formal sabbatical policies or career break programmes; however, beyond such arrangements, there is no automatic right or statutory entitlement to extended breaks,” she explains.
“Any leave taken beyond statutory entitlements, such as annual leave, is typically regarded as unpaid leave in accordance with Article 33 of the UAE Labour Law. While employees may legally take unpaid leave, such requests are subject to the employer’s discretion and require approval.”
If an employee resigns to pursue micro-retirement, the employment contract is terminated, and the employer is under no legal obligation to rehire the employee in the future unless specific contractual agreements are in place (such as return-to-work arrangements), which are generally uncommon, Ms Loku adds.
Results:
CSIL 2-star 145cm One Round with Jump-Off
1. Alice Debany Clero (USA) on Amareusa S 38.83 seconds
2. Anikka Sande (NOR) For Cash 2 39.09
3. Georgia Tame (GBR) Cash Up 39.42
4. Nadia Taryam (UAE) Askaria 3 39.63
5. Miriam Schneider (GER) Fidelius G 47.74
The Sand Castle
Director: Matty Brown
Stars: Nadine Labaki, Ziad Bakri, Zain Al Rafeea, Riman Al Rafeea
Rating: 2.5/5
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GAC GS8 Specs
Engine: 2.0-litre 4cyl turbo
Power: 248hp at 5,200rpm
Torque: 400Nm at 1,750-4,000rpm
Transmission: 8-speed auto
Fuel consumption: 9.1L/100km
On sale: Now
Price: From Dh149,900
Results
6.30pm: Maiden Dh165,000 (Dirt) 1,400m. Winner: Rio Angie, Pat Dobbs (jockey), Doug Watson (trainer).
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9.25pm:Handicap Dh185,000 (D) 1,400m. Winner: Midnight Sands, Pat Dobbs, Doug Watson.
The more serious side of specialty coffee
While the taste of beans and freshness of roast is paramount to the specialty coffee scene, so is sustainability and workers’ rights.
The bulk of genuine specialty coffee companies aim to improve on these elements in every stage of production via direct relationships with farmers. For instance, Mokha 1450 on Al Wasl Road strives to work predominantly with women-owned and -operated coffee organisations, including female farmers in the Sabree mountains of Yemen.
Because, as the boutique’s owner, Garfield Kerr, points out: “women represent over 90 per cent of the coffee value chain, but are woefully underrepresented in less than 10 per cent of ownership and management throughout the global coffee industry.”
One of the UAE’s largest suppliers of green (meaning not-yet-roasted) beans, Raw Coffee, is a founding member of the Partnership of Gender Equity, which aims to empower female coffee farmers and harvesters.
Also, globally, many companies have found the perfect way to recycle old coffee grounds: they create the perfect fertile soil in which to grow mushrooms.
FIGHT CARD
Sara El Bakkali v Anisha Kadka (Lightweight, female)
Mohammed Adil Al Debi v Moaz Abdelgawad (Bantamweight)
Amir Boureslan v Mahmoud Zanouny (Welterweight)
Abrorbek Madaminbekov v Mohammed Al Katheeri (Featherweight)
Ibrahem Bilal v Emad Arafa (Super featherweight)
Ahmed Abdolaziz v Imad Essassi (Middleweight)
Milena Martinou v Ilham Bourakkadi (Bantamweight, female)
Noureddine El Agouti v Mohamed Mardi (Welterweight)
Nabil Ouach v Ymad Atrous (Middleweight)
Nouredin Samir v Zainalabid Dadachev (Lightweight)
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Electric scooters: some rules to remember
- Riders must be 14-years-old or over
- Wear a protective helmet
- Park the electric scooter in designated parking lots (if any)
- Do not leave electric scooter in locations that obstruct traffic or pedestrians
- Solo riders only, no passengers allowed
- Do not drive outside designated lanes
Normcore explained
Something of a fashion anomaly, normcore is essentially a celebration of the unremarkable. The term was first popularised by an article in New York magazine in 2014 and has been dubbed “ugly”, “bland’ and "anti-style" by fashion writers. It’s hallmarks are comfort, a lack of pretentiousness and neutrality – it is a trend for those who would rather not stand out from the crowd. For the most part, the style is unisex, favouring loose silhouettes, thrift-shop threads, baseball caps and boyish trainers. It is important to note that normcore is not synonymous with cheapness or low quality; there are high-fashion brands, including Parisian label Vetements, that specialise in this style. Embraced by fashion-forward street-style stars around the globe, it’s uptake in the UAE has been relatively slow.
The biog
Fatima Al Darmaki is an Emirati widow with three children
She has received 46 certificates of appreciation and excellence throughout her career
She won the 'ideal mother' category at the Minister of Interior Awards for Excellence
Her favourite food is Harees, a slow-cooked porridge-like dish made from boiled wheat berries mixed with chicken
THE SIXTH SENSE
Starring: Bruce Willis, Toni Collette, Hayley Joel Osment
Director: M. Night Shyamalan
Rating: 5/5
What it means to be a conservationist
Who is Enric Sala?
Enric Sala is an expert on marine conservation and is currently the National Geographic Society's Explorer-in-Residence. His love of the sea started with his childhood in Spain, inspired by the example of the legendary diver Jacques Cousteau. He has been a university professor of Oceanography in the US, as well as working at the Spanish National Council for Scientific Research and is a member of the World Economic Forum’s Global Future Council on Biodiversity and the Bio-Economy. He has dedicated his life to protecting life in the oceans. Enric describes himself as a flexitarian who only eats meat occasionally.
What is biodiversity?
According to the United Nations Environment Programme, all life on earth – including in its forests and oceans – forms a “rich tapestry of interconnecting and interdependent forces”. Biodiversity on earth today is the product of four billion years of evolution and consists of many millions of distinct biological species. The term ‘biodiversity’ is relatively new, popularised since the 1980s and coinciding with an understanding of the growing threats to the natural world including habitat loss, pollution and climate change. The loss of biodiversity itself is dangerous because it contributes to clean, consistent water flows, food security, protection from floods and storms and a stable climate. The natural world can be an ally in combating global climate change but to do so it must be protected. Nations are working to achieve this, including setting targets to be reached by 2020 for the protection of the natural state of 17 per cent of the land and 10 per cent of the oceans. However, these are well short of what is needed, according to experts, with half the land needed to be in a natural state to help avert disaster.
The specs
AT4 Ultimate, as tested
Engine: 6.2-litre V8
Power: 420hp
Torque: 623Nm
Transmission: 10-speed automatic
Price: From Dh330,800 (Elevation: Dh236,400; AT4: Dh286,800; Denali: Dh345,800)
On sale: Now
The stats
Ship name: MSC Bellissima
Ship class: Meraviglia Class
Delivery date: February 27, 2019
Gross tonnage: 171,598 GT
Passenger capacity: 5,686
Crew members: 1,536
Number of cabins: 2,217
Length: 315.3 metres
Maximum speed: 22.7 knots (42kph)