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Lebanon Bank Customers to Regain Access to up to $800 a Month

The Banque du Liban, the central bank of Lebanon, is seen as protests against the government continue in Beirut, Lebanon January 14, 2020. (Reuters)
The Banque du Liban, the central bank of Lebanon, is seen as protests against the government continue in Beirut, Lebanon January 14, 2020. (Reuters)
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Lebanon Bank Customers to Regain Access to up to $800 a Month

The Banque du Liban, the central bank of Lebanon, is seen as protests against the government continue in Beirut, Lebanon January 14, 2020. (Reuters)
The Banque du Liban, the central bank of Lebanon, is seen as protests against the government continue in Beirut, Lebanon January 14, 2020. (Reuters)

Lebanon's central bank on Friday said depositors with accounts active as of October 2019 would be able to withdraw up to $400 a month plus the equivalent amount in local currency, marking a significant concession after a chaotic two days in Lebanese banking.

Lebanese banks had locked depositors out of their dollar accounts and blocked transfers abroad since the country was gripped by a financial crisis in late 2019.

Under a central bank circular issued last year, depositors were permitted to withdraw funds from their dollar accounts, paid in the local currency, but only at a rate of 3,900 pounds to the greenback.

That rate is only about a third of the value of dollars on the black market - which on Friday traded at upwards of 13,000 pounds to the dollar - but it has been the only way many Lebanese have been able to access their funds.

When the circular was issued last year Lebanon's black market rate was around half of what it is now. Lebanese account holders who withdraw at the 3,900 pounds rate are now taking a loss of about 70% on their funds and there have been calls for the central bank to raise the rate.

Friday's decision to grant depositors up to $800, with the exchange rate calculated at close to market value, follows a chaotic two days in the financial sector.

Details of the decision, which will take effect from July 1, will be issued later and will apply to the value of accounts as they stood at the end of March 2021, the bank said in a statement.

On Wednesday night the central bank had issued a statement saying it would stop allowing withdrawals at the fixed rate of 3,900 without elaborating.

It quickly back-pedalled on Thursday after protests erupted and the governor of the central bank reassured depositors that it was not bankrupt and people's deposits were safe and would be returned.

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Arab World

UN Warns of Profound Liquidity Crisis in Yemen’s Houthi-Controlled Areas

For the first time, the Houthis will face difficulties in financial transfers and foreign currency supply (local media)
For the first time, the Houthis will face difficulties in financial transfers and foreign currency supply (local media)
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UN Warns of Profound Liquidity Crisis in Yemen’s Houthi-Controlled Areas

For the first time, the Houthis will face difficulties in financial transfers and foreign currency supply (local media)
For the first time, the Houthis will face difficulties in financial transfers and foreign currency supply (local media)

A UN program recently warned of low foreign currency reserves and a liquidity crisis in Houthi-controlled areas if the economic conflict with the internationally recognized government continues in Yemen.

It also noted that the poor food consumption significantly worsened in the north, increasing by 78% year-on-year, compared to a 52% increase in the south.

In its Food Security Update, the World Food Program (WFP) warned that a banking crisis is looming in Yemen, as a transaction ban has been announced between the intentionally recognized government and the Houthis-controlled areas.

“These developments, coupled with diminished foreign currency reserves in the north, could result in liquidity crisis with profound implications on markets, livelihoods, and food security situation,” it said.

The Program also noted that the current escalation in the “economic conflict” is likely to disrupt the flow of remittances and the overall financial and banking sectors, posing significant challenges for importers to procure essential food and non-food items, and ultimately impacting food supply and food price.

According to the WFP Update, this conflict comes while limited income opportunities are a key challenge to accessing food, reported by 71% in the north and 60% in the south.

It added that the depth and severity of food deprivation (poor food consumption) also peaked in May, at 32% in the north and 31% in the south.

This trend significantly worsened in the north, increasing by 78% year-on-year, compared to a 52% increase in the south.

Severe food deprivation reached an all-time high in Al Jawf, Al Bayda, Hajjah, Amran, and Al Hodeidah, WFP said.

Around 8% of households in the north reported relying on begging to meet their essential needs, compared to three percent in the south, it showed, adding that this practice was particularly pronounced in Sadah, Hajjah, Amran, and Al Bayda.

WFP also said the total volume of fuel imported via the Red Sea ports increased by 32% during Jan-May 2024 compared to the same period in 2023.

Fuel imports via the southern ports of Aden and Mukalla decreased by 41% year-on-year, as local crude oil production from Marib largely contributes to covering domestic fuel needs in government controlled areas.

However, the WFP update said it is crucial to closely monitor import flows over the coming months, especially given the increased insurance costs for Yemeni ports, the diminished foreign currency reserves, and the banking crisis.

Also, by the end of May 2024, WFP said that the Yemeni riyal (YER) depreciated to an all-time low of YER 1,749 per dollar in government-controlled areas, losing around 25% of its value against the US dollar year-on-year.

“This decline is primarily attributed to low foreign currency reserves and revenue shortages due to reduced crude oil exports,” it said.

The UN program also noted that the overall volume of food imports via all Yemeni seaports increased by 22% during the first five months of 2024 compared to the same period in 2023.

However, it showed that the Red Sea ports saw a 35% annual rise in food imports during Jan-May 2024, while the southern ports of Aden and Mukalla exhibited a 16% annual decline.