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Under the leadership of Central Bank Governor Riad Salameh, the Central Council of the Lebanese Central Bank (CBL) convened on Tuesday afternoon to extend the effects of Circular 151, and to introduce amendments to Circular 158. These circulars define extraordinary measures regarding the withdrawal of cash from bank accounts.
Just before the Eid al-Adha holiday, the Central Bank of Lebanon (CBL) took a noteworthy step to alleviate the haircut process that has impacted bank accounts since the onset of the crisis in October 2019. Therefore, it implemented modifications to Circular 158, which previously granted account holders the ability to withdraw USD 400 in cash along with the equivalent of USD 400 in Lebanese pounds at an exchange rate of LBP 15,000 for one “lollar” or bank dollar. The revised circular now restricts withdrawals to USD 400 in cash exclusively; noting that this circular, initially issued on June 8, 2021, has been renewed on Tuesday for the third consecutive year.
The CBL has not released any official information regarding the decisions taken by its Central council. However, the news, which leaked to the press, was confirmed to This is Beirut in the evening by two CBL sources.
According to one of the sources, this haircut relief measure on bank deposits will not be exclusive.
Inside the CBL, a staunch defense of the central bank’s actions is accompanied by sharp criticism concerning the lack of decisive leadership that can reach a consensus regarding the future of Lebanon. This includes the crucial tasks of electing a Head of State and adopting a series of necessary reforms.
According to the source, “the Lebanese people deserve to recuperate their money,” and the CBL Board is dedicated to this goal. They will review, and potentially suspend, any measure that doesn’t produce the desired outcomes. Interestingly, over the past three years, the CBL Board has held three times more meetings than the Council of Ministers. This stark contrast highlights the disparity in productivity between the monetary and political authorities.
300 Dollars
As per the mentioned sources, the broad outlines of Circular 158 will remain unchanged until further notice. The circular pertains to a bank deposit of USD 50,000 spread over five years, and only applies to small depositors. However, the customers wishing to subscribe to Circular 158 starting July 2023 will only be entitled to USD 300 in cash on a monthly basis.
Currency Velocity
In an interview with This is Beirut, Nicole Ballouz Baker, associate professor at the Saint Joseph University, welcomed the recent easing up of the haircut process on certain bank deposits. As a result, she expects the market to react positively. “It’s obvious that the CBL is seeking, by all means, to minimize the printing of Lebanese currency. This time, it is relying on the concept of money velocity,” she explained.
By focusing on the currency velocity, the CBL highlights the quantitative theory of money, which establishes a direct correlation between money supply on the one hand, and inflation and exchange rate speculation in the Lebanese context on the other.
Moreover, thanks to Sayrafa, CBL’s platform, the Central bank currently has precise information regarding the market’s demand for fresh dollars. Consequently, it has been compelled to engage in speculative activities.
