Cabinet implements "mini Capital Control" to regulate bank transfers and withdrawals

Amid ongoing news regarding bank transfers benefiting politicians and people of influence at the expense of other depositors, and with the absence of any law to regulate transfers and withdrawals after three and a half years of crisis and repeated mismanagement of Capital Control by officials, the Cabinet approached the situation with a "smart" solution.

The Cabinet has requested from the Banque du Liban (BDL) to impose a kind of "mini Capital Control" through circulars that the bank will issue soon.

The circulars will include specific ceilings for transfers and withdrawals that banks must adhere to, with exceptional cases in which withdrawal and transfer are allowed, such as for hospital or education expenses or other urgent needs.

However, funds held in fresh dollars are excluded, and depositors can do whatever they want with them.

The government's decision aims to prevent the banks from depleting the remaining dollars held by them and to prevent them from leaving the country.

On the other hand, it seeks to create equality among all depositors.
Is this step the solution? Why is it being taken now by a caretaker government?

This decision is a promise made by Prime Minister Mikati to the banks to convince them to end their strike. The banks demanded enacting a Capital Control law to protect them from lawsuits filed against them by depositors inside or outside the country.

According to banking sources, they consider BDL's circulars as evidence in court in many cases.

However, they believe that the circulars are not sufficient. In many cases, the judiciary is considered legal, and the circulars do not replace the law, which would create additional confusion in the sector.

On the other hand, some experts consider this decision as fair to depositors and preventing favoritism. Still, it is in the banks' interest primarily at the depositor's expense, who continues to face restrictions without any plan for deposit recovery while their funds evaporate over time.

They add that such a solution is no substitute for a Capital Control law, which is an essential condition of the International Monetary Fund (IMF) and takes into account the IMF's criticisms.

Once again, the state is choosing to address the crisis in a patchy manner, indicating that reforms are becoming further and further away from the priorities it should be focusing on.