Lebanon unveils first draft law to recover deposits since financial crash

BEIRUT: Prime Minister Nawaf Salam said on Friday that Lebanon had put forward its first comprehensive legal framework aimed at recovering deposits and addressing a financial gap.

The proposed fiscal gap law, a long-awaited measure needed to restructure Lebanon’s debt burden, sets out how financial losses will be shared among the state, the central bank, commercial banks and depositors.

He said the draft, which will go before the cabinet on Monday, would restore confidence in Lebanon among Arab countries and the International Monetary Fund.

The draft law is the first to surface since Lebanon’s financial system collapsed in 2019 after decades of corruption, waste and unsustainable financial policies.

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The World Bank ranks the crisis among the worst globally since the mid-19th century. The crisis froze depositors out of dollar accounts, slashed withdrawals and drove the Lebanese pound down over 90%. In 2022, the government put losses at about $70 billion, a figure now likely higher.

Under the plan, depositors with balances below $100,000 representing 85% of all accounts - would receive their full funds over four years. Medium and large depositors would get $100,000 under the same terms, with the remainder converted into tradable bonds equal to their deposits.

“The draft law may not be perfect — and it is not — but it is a realistic and equitable step toward restoring rights and addressing the collapse”, Salam added.