Lebanon's capital control law session cancelled after boycotts

Capital control law is one of the reforms requested by IMF to unlock billions of dollars in loans

Lebanese MPs at a parliament session in Beirut in November 2022. EPA
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A Lebanese parliamentary session to discuss a law on capital control and the creation of a sovereign wealth fund has been postponed after legislators from the two main Christian political parties boycotted the session.

The Free Patriotic Movement and Lebanese forces said they would oppose any parliamentary meeting during which the laws will be voted on as long as the country is without a president.

They said that, according to the Lebanese constitution, the parliament is supposed to become an electoral body and convene only to elect a new head of state.

Only 53 of 128 MPs showed up for the session, causing its cancellation because of the lack of a quorum. No date was provided for a new session.

Lebanon has been without a president since October 2022. The highly divided parliament has convened 12 times to chose a successor to former head of state Michel Aoun, yet failed to reach consensus on a candidate's name.

A law on capital control, which limits the flow of foreign capital in and out of the country, is one of the prerequisites of an International Monetary Fund (IMF) deal to unlock billions of dollars in loans and lift the country out of its steep financial crisis, which began in 2019.

Because of the dollar shortage, Lebanese banks have enforced drastic and discretionary limits on transfers and withdrawals for ordinary savers while favouring well-connected depositors.

The international community considers capital control the only way to ensure a fair distribution of the foreign currency assets left in the economy.

It was on the road map of reforms of Wassim Mansouri, who took on the role of interim head of Lebanon's central bank on July 31.

Several versions of the law on capital controls have been proposed since the crisis started, but it has never been passed despite the central bank's foreign exchange reserves dwindling.

Dozens demonstrated outside the parliament building in Beirut before of a scheduled legislative session to condemn the constraining measures, which they view as illegal because of the lack of formal legislation.

The sovereign wealth fund law, also due to be discussed, refers to a state-owned investment fund that holds and manages financial assets on behalf of a country's government.

Its creation was approved on July 31 by parliament's finance and budget committee.

This is related to the oil and gas exploration in Block 9 of its exclusive economic zone led by French company TotalEnergies after a US-brokered deal that in October 2022 delineated the disputed maritime boundaries between Lebanon and Israel.

Sums generated from natural resources are supposed to be used for investment abroad and development projects.

The offshore drilling rig arrived in Lebanese waters on Tuesday to begin oil and gas exploration. There are no guarantees that Block 9 holds any oil or gas.

Updated: August 17, 2023, 12:46 PM