Banks across Lebanon are closing their doors following a wave of hold-ups by desperate depositors as the country’s economic woes worsen.
Strict daily withdrawal limits aimed at preventing a run on Lebanon’s faltering currency have triggered “an unprecedented wave of hold-ups by frustrated depositors seeking access to their savings”, reported Al Jazeera.
“In the past two months alone”, said The Guardian’s Middle East correspondent Martin Chulov, “more than a dozen bank ‘robberies’ have taken place”, some of which “have involved real guns and bad tempers” while others “were bluffs that won the day”.
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What has happened to the Lebanese economy?
GDP has shrunk from $52bn in 2019 to just $22bn in 2021, in an economic downturn triggered by “years of state corruption, waste and unsustainable financial policies”, said Reuters.
Inflation has soared to more than 200%, “and the vast majority of all new spending has been served by dollars brought into the country, not by bank reserves”, said The Guardian’s Chulov.
The Lebanese pound currently trades at around 38,000 to the dollar. Under limits imposed by banks, “most withdrawals of foreign currency have to be carried out at an exchange rate unfavourable to depositors, meaning that depositors will lose almost 80% of the value of the money in their savings if they withdraw it”, Al Jazeera reported.
Amid what the World Bank has described as the world’s worst economic crisis since the 1850s, banks have also been suspending front-office services in recent months to protect their staff and resources.
“Many banks are bankrupt,” said lawyer Dina Abou Zour, founder of a group called the Depositors’ Union that is fighting people’s right to access their savings.
Abou Zour told The Guardian that “there are no changes in sight. That’s what’s making depositors lose hope.”
The International Monetary Fund (IMF) has criticised the government for failing to implement much-needed reforms to tackle the economic meltdown. “Those reforms are key to unlocking an IMF bailout to help ease the crisis, which economists argue has been caused by decades of wasteful spending and corruption,” said Al Jazeera.
Why are citizens raiding banks?
“Post-civil war Lebanon can be described as a series of calamitous events impacting a people who are already no stranger to being taken advantage of by their political system,” wrote forensic anthropologist Julian McBride for global news and analysis site Geopolitical Monitor. Officials who “have taken advantage of Lebanon’s sectarian-based political system in order to remain in power indefinitely” have taken the country to “a critical point due to the excessive mismanagement of public funds”.
Citizens are bearing the brunt of the economic collapse, driving some to desperate measures. A 28-year-old woman called Sali Hafiz has been “lauded as a national hero after forcing staff at a BLOM Bank branch in Beirut to give her thousands of dollars from her own account by waving a replica gun in order to fund her sister’s cancer treatment in hospital”, Al Jazeera reported.
Amid a wave of public sympathy, “her gamble paid off”, said The Guardian’s Chulov, with a judge last week handing Hafiz “a small fine and a six-month travel ban – a veritable slap on the wrist for anyone convicted of a bank heist”.
Just hours before Hafiz was sentenced, a Lebanese MP, Cynthia Zarazir, had “staged a sit-in with her lawyer at her own branch until officials agreed to hand over $8,500 (£7,600) from her account, which she wants to use for her sister’s cancer treatment”, Chulov reported. “Two more branches faced similar standoffs.”
Other cases include a man armed with an assault rifle who held up a Beirut bank in August and demanded $20,000 to pay for a family member’s medical treatment.
“He too was treated lightly by investigators and court officials, all of whom seem out of ideas about how to deal with a phenomenon that has the broad support of a desperate population,” Chulov added.
What next?
The banks “informal capital controls have left depositors mostly locked out of their accounts as the currency lost more than 95% of its value, pushing 80% of the population into poverty”, said The Times.
There appears no easy solution for Lebanon, which was once “regarded as a global economic powerhouse in the wake of independence from France”, said McBride on Geopolitical Monitor.
“One of the central difficulties is making public officials more accountable” without “stoking conflict amongst and between the religious communities that they belong to”, he continued. “The same warlords, thieves, and drug traffickers that fought in the civil war now rule Lebanon and hide behind their political parties and their religious sect to avoid blame and accountability.”
But if reforms are not implemented, Lebanon “could suffer even more humanitarian catastrophe and, eventually, a state collapse that would produce disastrous consequences across the wider geopolitics of the Middle East”.
