Lebanese government slams banks' rejection of financial recovery plan

Access to IMF funds would be at risk should the nation fail to adopt the road map

Banque du Liban's offices in Beirut. A plan to cancel 'a large part' of the central bank's foreign currency obligations has been criticised. Reuters

The Lebanese banking association's rejection of a financial recovery road map passed by the country's Cabinet last week is “dangerous and irresponsible”, the office of Deputy Prime Minister Saadeh Al Shami has said.

“This state of denial, if it continues, will make everyone regret their actions,” Mr Al Shami's office said on Tuesday, in a statement posted on the website of a local television channel.

The plan would cancel “a large part” of the central bank's foreign currency obligations to commercial banks and dissolve non-viable lenders by November, Reuters reported.

An electoral worker sits next to ballot boxes, at the Justice Palace, in Jdeideh. Reuters

A soldier stands guard as ballots are counted at the Justice Palace. Reuters

Jad Ghosn, an opposition candidate, gestures as people wait for the announcement of official election results, in Jdeideh. Reuters

Lebanese Interior Minister Bassam Mawlawi announces the final results for some districts. EPA

Opposition candidate Yassin Yassin gestures as he is greeted by supporters in Jeb Jennin, West Bekaa. Reuters

Supporters of the Lebanese Forces take to the streets during parliamentary elections in the Ashrafieh district of Beirut. Bloomberg

Lebanon headed to the polls with its economy in the grip of hyperinflation. Bloomberg

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Supporters of Lebanon's Shiite groups Hezbollah and Amal lift their flags during a motorbike rally after voting. AFP

Children swim in an inflatable pool that supporters of former prime minister Saad Hariri installed to illustrate their intention to boycott parliamentary elections in Beirut, Lebanon. AP Photo

Voters queue to place their vote in parliamentary elections in Beirut, Lebanon. EPA

Nabih Berri, Speaker of the Lebanese Parliament, stands in a polling booth to vote in Tebnin. Reuters

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A Lebanese voter casts her ballot paper in Beirut. EPA

Gyorgy Holvenyi (R), chief observer of the European Union election observation mission, visits a polling station in Beirut. EPA

Lebanese people wait to vote during parliamentary elections in the capital city. EPA

Sheikh Abdul Latif Derian, Grand Mufti of Lebanon, casts his ballot paper during parliamentary elections in Beirut. EPA

People queue to cast their votes in the Lebanese capital. AP

Posters in Al Tariq Al Jadida, Beirut, depict Lebanon’s former prime minister Saad Hariri. Reuters

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Former prime minister Hassan Diab, who succeeded Saad Hariri, casts his ballot in Beirut. AFP

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A woman waits to vote in Beirut. EPA

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Former Lebanese prime minister Fouad Siniora casts his vote at a polling station during the parliamentary election, in Sidon, southern Lebanon. Reuters

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A woman votes in Lebanon's parliamentary elections in Beirut. AP

Police check the ID of voters outside a polling station near the Lebanese coastal city of Byblos (Jbeil), north of Beirut. AFP

A voter dips her finger in ink after casting her ballot in the parliamentary election at a polling station near Byblos. AFP

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People queueing to vote at Ras El Nabeh Public School for Girls. Fatima Al Mahmoud/ The National

The plan places the full losses of the country's economic meltdown on depositors, the Association of Banks in Lebanon (ABL) had said on Tuesday, putting the losses at more than $70 billion.

Lebanon's financial sector losses have reached $72 billion, Mr Al Shami had told bondholders in a May 11 web presentation, citing devaluation, the expected sovereign debt restructuring and the restatement of selected assets of the central bank and the banking sector.

The ABL had said Mr Al Shami's plan “absolved the state and the Banque du Liban of their obligations to pay their debts” to commercial banks.

Deposits had been “cancelled at the stroke of a pen”, the ABL said, deriding “genius” experts who did not take heed of an alternative plan suggested in 2020 that called for a fund to manage privatised state assets.

However, Mr Al Shami's office called the ABL's accusations against the state and the Banque du Liban “baseless” and “false”.

Mr Al Shami described the ABL’s statement as a “scandalous attempt at claiming to protect depositors”, who “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,” Mr Al Shami said.

The statement said Lebanon would not have access to IMF funds if it failed to put the plan into effect.

The recovery plan was approved on Friday by Cabinet in its final session, a few hours before it lost its decision-making powers after the election of a new parliament on May 15.

On April 7, the IMF and Lebanon had reached a staff-level agreement. The fund said it could support the country with the equivalent of about $3 billion over four years.

The ABL hailed the agreement as a “crucial first step” towards recovery and said that “the banking sector remains open to any solution that resolves the crisis”.

But Lebanon must put into effect several difficult reforms before the IMF board meeting, which is in July. None of them have been executed yet.