By Dana Khraiche – Bloomberg
- Khalil proposes hiking ceiling on insured bank deposits
- Local lenders under growing pressure amid nationwide unrest
Lebanon’s caretaker Finance Minister Ali Hasan Khalil said he expects state revenues to drop by nearly half this month amid a deepening financial and political crisis, as he proposed a sharp rise in the ceiling on insured bank deposits to help restore calm.
Speaking to reporters on Wednesday, Khalil said there had been a “massive” drop in income that put this year’s deficit target beyond reach, with a fall of between 40% and 45% expected in December from a year ago. The government usually gets 5 trillion Lebanese pounds ($3.3 billion) in the last three months of the year, he said.
Lebanon relies on remittances from the millions of its citizens living abroad. However, capital inflows needed to finance the large current-account and fiscal deficits have slowed as confidence has dwindled; outflows have gathered pace.
Banks, under growing pressure as the crisis shows few signs of ending, haven’t been subscribing to Treasury bills to finance the deficit, the minister said.
Lebanon has been gripped by weeks of nationwide protests that already toppled a government, putting the pound’s peg against the dollar under strain. With deposits also under pressure, banks have responded by tightening restrictions on the movement of capital and even refusing to dispense dollars.
Khalil said he had submitted a draft law that amends the limit covered by the National Institute for Bank Deposit Insurance to 75 million pounds from 5 million pounds, established under Lebanon’s monetary law. The amendment requires approval by parliament. The insurance fund’s capital is made up of contributions from local banks.
“This doesn’t mean that we’re headed toward a dramatic event but this is the government’s duty and should have been done because of developments in the value of the currency,” he said.