Capital controls: IMF and BDL clash over Lebanons financial future

Capital controls: IMF and BDL clash over Lebanons financial future

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2023-08-14 | 09:43

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Capital controls: IMF and BDL clash over Lebanon's financial future

Lebanon is grappling with discussions over proposed capital control legislation, with neither the International Monetary Fund (IMF) nor the Banque du Liban (BDL) satisfied with the current formulation.

The BDL seeks specific amendments, including encompassing restrictions on Lebanese lira holdings. 

At the same time, reports suggest that the IMF is leaning towards including capital controls solely for fresh dollars in banks related to transfers rather than withdrawals.

Ultimately, the fate of this issue rests with the Lebanese government.

Sources closely following the matter assert that if capital controls were to encompass outbound transfers of fresh dollar deposits abroad, the account holders could still withdraw funds freely, raising concerns about such regulations' effectiveness.

Notably, some deposit holders have already reacted to discussions of capital controls by initiating withdrawals from banks.

These sources emphasize that the core objective of capital controls is to prevent significant outflows of US dollars from Lebanon and curb the manipulation of the exchange rate by using the Lebanese lira for speculative purposes.

However, the sources suggest imposing high customs fees on domestically produced goods that Lebanon has, exceeding, for instance, 300 percent of the import price. This measure could reduce imports in