More than two years passed on the imminent urgency of the Capital Control Law which was supposed to put a lid on run-away foreign currencies and dried-up bank money. Does Lebanon need a Capital Control Law today?!
By Mohammad Ibrahim Fheili
If the answer is ‘yes’, what kind of law should that be? The objective of passing the Capital Control Law today in 2022 should be much different from that in 2019. The word "control" is misleading.
Today’s Law ought to relax some of the chaotic controls imposed by banks, and aim at:
1. Preserving what is left of liquidity in the banking sector and restoring life to banking. Today, we do have banks in Lebanon, but we sure don't have banking!
2. Bringing back order to the relationship between commercial banks and their customers in terms of leveling the playing field, and putting an end to discrimination and favoritism.
3. The necessity of securing liquidity (fiat and bank money) to pay for and finance:
- household expenditures, and Investment spending to give a push to manufacturing, agriculture for food security, and health for the welfare of the society. In these times of negative supply shocks because of the Russia-Ukraine conflict, inflationary pressure should take a back seat to boost aggregate demand.
4. Pardon the banks (and not the bankers), with retroactive effect dating back to the date of the outbreak of the crisis, for all illegal actions (e.g., non-execution clause), only the necessary actions. It is impossible to succeed in completing the process of restructuring the banking sector without this “pardon”, which today is impossible in the eyes of everyone.
The high rate of lawsuits at home and abroad has turned the entire banking sector into a hotbed of problems unable to attract new investors. This non-execution clause shall be issued through an article in the debated Capital Control Law, or in a separate stand-alone piece of law.
What is important today and must be accepted by every citizen looking for a better future is that only by restructuring the banking sector and organizing the work in it can the depositors get their money without a “haircut,” and hope for the return of the necessary banking services.
Strong piece by Mr. Feheili. Read most of his other work as well 👍
[…] Among the requested reforms is the recent re-endorsement of the controversial capital control law. […]