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1/ What we know / is transpiring from last night's @BDL_Lebanon communique re the 25,000 USD saga. First, it seems that the estimate of this is roughly 14 billion USD. Part of the deal is that whomever is going to benefit from this so-called largesse will have to dip into
2/ his/her account for another 25,000 USD that will be paid in LBP (at 3,900 LBP/USD or Sayrafa new rate -yes another one, we do not know for sure yet) but has to be blocked with the bank for a period of 3 years. So , it is assumed that the first 25,000 USD will be paid
3/ on a monthly basis (about 700 USD per month) over a period of 3 years. How generous! It is also assumed that if one has less than 25,000 USD in the account, half would be paid in cash and the other half subject to the LBP treatment mentioned above.
4/ The first question is where this money will be coming from? Banks would like it to come from BDL and BDL is going to like it to come from the banks' 3% liquidity. The problem is that banks, in aggregate, have not been able to gather that amount (roughly 3.5 bn $) while some
5/ individuals banks did and others did not. @ABLLebanon allegedly confirmed in parliament that banks were not able to get that 3% in aggregate. So, first battle pitting banks vs BDL will be regarding the source of the funding. Second, why did BDL do that? In a last ditch
6/ effort to divert attention from the legal headaches and its ramifications, the Governor is trying to rally popular support thus pitting the banks against depositors, as banks will find it difficult to fund such initiative.
7/ Smart political move but not worthy of a regulator that would care about the long-term health of the financial sector. Third, should the depositor like such deal? Today, and due to the blockage exercised by politicians, BDL and ABL, the depositors have effectively a haircut
8/ of roughly 75% on all their deposits. Under this “plan” these depositors will be able to take a smaller haircut but at a higher risk (since it is extended over 3 years). This haircut is effectively reduced to 34% to 50% (taking into account the longer period and the risk)
9/ but that means all other depositors are subject to a MUCH LARGER haircut. Expect a fight there! Fourth, if you think a bit about this, you realize that this is another financial engineering feast from the master of deception.
10/ Why? Bcs the dollar imbalance is reduced by 2x14bn but 60 trillion LBP printed and you can be sure that the 14bn$ would leave the country…We will be only left with gold reserves to rebuild a new economy and u still have the remaining losses to deal with. What a great plan!
11/ Fifth, remember that there is still a significant haircut on the first 50,000 USD but had the Government Reform Plan been implemented, depositors could have collected the entirety of their deposits up to a level far exceeding 50,000 USD. Finally, this plan flies in the
12/ face of the concept of cap controls and it shows one more time that no one in this political and financial leadership is serious about going to the IMF and willing to undergo reforms. Say hello to a zombie country for many years to come if we're still at this stage of thought
