Lebanon PM Publishes Long-Awaited Banking Law Draft: A Step Towards Recovery?

Beirut, Lebanon has been grappling with one of the most severe economic crises in recent history since 2019. The nation’s financial system collapsed, trapping depositors’ savings and crippling the economy. For years, a crucial missing piece in any recovery effort has been a comprehensive plan to address the massive losses incurred – and who should bear them.

That long wait may finally be nearing an end. On Friday, Lebanese Prime Minister Nawaf Salam took a significant step, publishing a draft banking bill designed to tackle this very issue. This proposed legislation aims to distribute the immense losses from the 2019 economic meltdown between the country’s banks and the state.

The Core Challenge: Distributing the Burden

The central dilemma has always been how to fairly and effectively distribute the billions of dollars in losses. This new draft bill is expected to provide a framework for recapitalizing the banking sector while also determining the extent of government responsibility. While specific details of the distribution mechanism are yet to be fully scrutinized, the mere publication of the draft is a landmark event.

For years, political paralysis and deep divisions have prevented any meaningful progress on this front. The absence of a clear loss distribution plan has been a major sticking point in negotiations with international bodies, particularly the International Monetary Fund (IMF), which has conditioned financial aid on significant reforms, including a viable banking sector restructuring.

What’s Next for Lebanon?

The publication of this draft bill is just the beginning. It will now face rigorous debate and potential amendments in parliament. The process will undoubtedly be complex and contentious, given the vested interests and the profound impact on every Lebanese citizen. Depositors, who have borne the brunt of the crisis, will be keenly watching to see how their interests are protected and if any plan for recovery of their trapped funds is included.

While the road ahead remains challenging, Prime Minister Salam’s move injects a degree of momentum into Lebanon’s stalled reform efforts. It signals a potential commitment to addressing the root causes of the financial crisis, a crucial step if Lebanon is ever to rebuild trust in its institutions and pave the way for sustainable economic recovery.

Source: Original Article