Lebanon PM claims 98% of depositors will not be affected by economic rescue plan

File photo: Caretaker PM Hassan Diab

 Lebanese Prime Minister Hassan Diab said on Thursday that 98% of the country’s depositors will not be affected by an economic rescue plan, the draft of which included a proposal to fund some losses with a contribution from deposits. 

PM Hassan Diab

“I can announce today that the percentage of those who will be unaffected will be not less than 98 percent of depositors,” Diab said in a televised address without elaborating on how he came up with this number despite the rumors of haircuts and bond exchanges.

According to observers Diab’s claim makes absolutely no sense since depositors have not even been able for several months to withdraw their US dollars from their US dollar accounts in Lebanese banks. They are only allowed to withdraw in Lebanese pounds , resulting in a loss of about 50 % of the value of their deposit because the banks are sticking to the peg as directed by the Central bank and the pound has unofficially depreciated 50 % from the peg. The peg is supposed to be 1507.5 LL to US dollar while the actual market exchange rate is around 3000 LL to US dollar.

MP Marwan Hamadeh , a member of Progressive Socialist Party’s Democratic Gathering Parliamentary group warned on Wednesday that PM Diab’s government and its backers are seeking to “destroy Lebanon’s economic system” .

PM Diab’s backers are Hezbollah and its allies Speaker Nabih Berri’s Amal movement and president Aoun’s FPM.

Lebanon’s economy will contract by a massive 12 percent in 2020, compared to shrinking 6.5 percent last year, the International Monetary Fund said Tuesday.

In its World Economic Outlook, the IMF said Lebanon, which has defaulted on its mountain of debt, faced a popular uprising and several weeks of lockdown due to the coronavirus pandemic, was the worst performing economy in the Middle East and North Africa.