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The chaos that has prevailed over the Lebanese financial sector for four years has recently jumped to a new level. It has become an economic concept, just like capitalism or socialism. And it is governing the country.
The newly-coined concept of “financial chaos” involves this sticky mess surrounding the value of the lollar, the dollar, public and private finances and permitted, forbidden or required banking practices. And in all these spheres, we’re swimming in a nebulous space that even the well-worn Franz Kafka couldn’t have imagined.
Regarding public finances, for example, represented by the 2024 budget, no one really believes in the accuracy of the numbers. The dollar doesn’t have a uniform value there. And for the rest, we’ve multiplied the rates by random coefficients, ranging from 30 to 100, or more, or less. In reality, it’s up to individual discretion.
What’s surprising, however, is that the government, in presenting the budget proposal (with a subsequent amendment), claimed it was balanced, with zero deficit. In the version modified by the Finance Committee, then adopted by Parliament, three-quarters of the tax measures were lowered. Nevertheless, the government assures it will still be balanced. Since there won’t be a closing audit of accounts, as has been the case for 20 years, we’ll never know where the truth lies.
The government asserts, in any case, that it’s not its role to set the dollar or lollar rate. That’s up to the monetary authority to handle. Except Wissam Mansouri isn’t falling for it; he’s already there. He rejects this theory and officially aligns with the market rate, 89,500 Lebanese pounds to the dollar. A position, justified or not, that leaves everyone embarrassed.
Let’s take bank depositors, for example. Circulars entitled them to payments of USD 400 or 300. Then comes another, more modest circular, an amendment to 151, which offers USD 150, but with a long list of conditions that will exclude most depositors. A matter of financial prudence, they justify. It’s as if they were asking for a brain MRI to ensure that their use of this monthly windfall won’t be excessive to the point of destabilizing the country’s monetary situation.
But if you want to withdraw beyond this amount, what rate should be used? There is no precise indication pertaining to that. Banks can’t apply the now-official Central Bank (BDL) rate of LBP 89,500 for fear of flooding the market with Lebanese pounds, which the BDL itself can’t even supply. They can stick to the rate of LBP 15,000, or not, with uniform withdrawal limits, or not. Just to exacerbate their relationships with their clients even more, if that is even possible.
Let’s move on to companies and their accountants, all focused right now on calculating the result of the past year and the overall balance of assets and liabilities. A dubious attempt. They could very well end up winners in LBP (fresh or bank?), losers in fresh dollars, balanced in lollars (but depending on the rate adopted). Their audits are scraping whatever is left of their neurons, already well worn by past exercises. It’s true that many companies maintained dual accounting before 2019. Now they’re at five or six, and it’s up to each to choose which one is real.
For bank balance sheets, it’s even worse. Whatever they do, their assets and liabilities and the balance of the past year will be theoretical. They have no idea what benchmark to adopt; alternatively, they choose random benchmarks to calculate the value of their dollars, lollars, credits, real estate, investments, financial securities portfolios, etc. The cult of ambiguity raised to an economic system, the same already applied for politics and the judiciary.
In short, we apologize if you haven’t learned anything comforting from reading this column. This has become the norm in the analyses scattered everywhere. But it seems that the government and the BDL are currently working to shed some light on the future with pockets full of projects. So we may be enlightened on essential questions in the near future.
Or not.
