Lebanese MPs once again fail to adopt capital controls

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Lebanon’s long-delayed draft capital control law was facing further hold ups on Monday amid a worsening financial crisis now in its third year.

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Formal capital controls are a policy recommendation of the International Monetary Fund, from which Lebanon hopes to secure an aid package after the country’s financial system imploded in 2019, paralyzing the banking system and freezing depositors out of US dollar accounts.

Members of Lebanon’s parliament on Monday said they had not adopted at committee level the draft law pushed for by the government and banks, having announced over the weekend a new bid to pass the bill at a Tuesday general assembly of parliament.

MP Ali Hasan Khalil, a top aide to House Speaker Nabih Berri, said that the government must first formally adopt the law and then refer it to parliament for approval, adding Berri was ready to schedule another session to adopt the bill before parliamentary elections on May 15.

A spokesperson for Lebanon’s Prime Minister said Cabinet would discuss the capital control bill on Wednesday and refer it to parliament.

Khali said the bill was referred directly to parliament by a committee, in an apparent reference to Lebanon’s IMF negotiating team. Deputy Prime Minister Saade Chami had told Reuters comments from the IMF had been included in the draft.

The latest attempt to pass the law comes amid growing tension between members of the country’s judiciary and its banks, seven of which have had their assets frozen in three separate actions this month.

Banks have criticized what they have described as “arbitrary and illegal measures” against them and renewed their demand for the government to introduce the capital control law.

Judges in Lebanon have recently ruled in favor of at least two depositors who have sued to demand savings be paid out in cash. In a high-profile case abroad, a London court in February ruled in favor of a saver seeking $4 million deposited with Bank Audi and its peer SGBL.

The draft was last discussed a few weeks ago.

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