Cash-strapped Lebanon to probe ‘suspicious’ capital flight

A protester leads a chant during ongoing protests against the Lebanese political class, in front of the building of the Lebanese Association of Banks in Beirut, Lebanon, Thursday, Dec. 26, 2019. (AP)
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Updated 27 December 2019

Cash-strapped Lebanon to probe ‘suspicious’ capital flight

  • Lebanon’s banks have since September imposed increasingly tight restrictions on dollar withdrawals and transfers
  • As Lebanon’s protest movement enters its third month, demonstrators are increasingly targeting banks

BEIRUT: A probe has started into the billions of dollars sent overseas from Lebanon amid a political crisis that has gripped the country for months, with the country’s central bank chief warning that “nothing can disappear.”

Lebanon is experiencing a severe liquidity crunch in light of an economic downturn, political gridlock and massive protests, factors that have triggered a crisis of confidence inside and outside the country.

Banque du Liban governor, Riad Salamé, said: “People may do as they please with their money, but if suspicious funds were transferred in 2019, we will investigate them, and investigations start in Lebanon. We will do whatever we are legally permitted to do to verify all the transfers that took place. Nothing can disappear. The central bank is addressing the gradual crisis, and we hope the decisions we have taken to increase the banks’ capital will help the country recover so that the economy can improve.”

He did not blame civil society for the deterioration of the Lebanese lira’s exchange rate against the dollar. After Oct. 17, the date on which the protests erupted, he said that the banks closed for two weeks and it was this shuttering that created turmoil in the financial market.

The dollar’s exchange rate at shops has reached 2,100 liras, but Salamé said there was no change in the official rate which is set at 1507.50.

A parliamentary finance and budget committee said overseas remittances worth billions of dollars were made from Lebanese banks. 

“Approximately $11 billion of bank money has ended up overseas,” said MP Hassan Fadlallah, while committee head Ibrahim Kanaan said Lebanese people’s concerns over the domestic situation had led to the withdrawal of $6 billion from banks.

People braved bitter conditions to protest outside a banking association’s headquarters and Banque du Liban branches. There is a campaign to confront banks withholding the money of small depositors. Protesters urged people to stop making loan repayments, condemning banking policies and corruption.

Security measures around banks have failed to deter anger, with people demanding money and salaries from staff.

One man entered a branch of Credit Libanais in Tripoli with an axe in his hand, demanding they give him his money. People around him and security forces intervened to calm him down.

Shopkeepers have closed their doors because they cannot import goods, and owing to a decline in customer numbers, and a failure to pay rent.

Tony Ramy, who is president of a restaurant, cafe and nightclub syndicate, urged people to go out as much as possible on New Year’s Eve so restaurants did not remain empty.

Lebanon appears unable to shake off its financial and political woes. The prime minister in charge of forming a new government following the abrupt resignation of political scion Saad Hariri, Hassan Diab, is laboring away out of the spotlight to gather together his Cabinet. 

“What is required in this difficult time is a rescue emergency government without wasting time on some classifications and descriptions,” MP Qassem Hashem said. 

“Time is precious and must not be wasted on these trivial titles that are useless for the rescue process that requires everyone’s participation.”

Saudi Arabia looks to cut spending in bid to shrink deficit

Updated 01 October 2020

Saudi Arabia looks to cut spending in bid to shrink deficit

  • Saudi Arabia has issued about SR84 billion in sukuk in the year to date

LONDON: Saudi Arabia plans to reduce spending next year by about 7.5 percent to SR990 billion ($263.9 billion) as it seeks to reduce its deficit. This compares to spending of SR1.07 trillion this year, it said in a preliminary budget statement.

The Kingdom anticipates a budget deficit of about 12 percent this year falling to 5.1 percent next year.

Saudi Arabia released data on Wednesday showing that the economy contracted by about 7 percent in the second quarter as regional economies faced the twin blow of the coronavirus pandemic and continued oil price weakness.

The unemployment rate among Saudis increased to 15.4 percent in the second quarter compared with 11.8 percent in the first quarter of the year.

The challenging headwinds facing regional economies is expected to spur activity across debt markets as countries sell bonds to help fund spending.

Saudi Arabia has already issued about SR84 billion in sukuk in the year to date.

“Over the past three years, the government has developed (from scratch) a well-functioning and increasingly deeper domestic sukuk market that has allowed it to tap into growing domestic and international demand for Shariah-compliant fixed income assets,” Moody’s said in a statement on Wednesday. 

“This, in turn, has helped diversify its funding sources compared with what was available during the oil price shock of 2015-16 and ease liquidity pressures amid a more than doubling of government financing needs this year,” the ratings agency added.