Lebanon to Haircuts?

Are we heading for capital control and haircuts in the coming few months?

Apparently Lebanese officials have finalized their decision and are going for official negotiations to name the future prime minister, most probably Samir Al Khatib, that will head and form the future government cabinet in Lebanon.

The drastic decline of the economic situation in Lebanon has reached an unprecedented situation and the hopes that a new government can rescue us from drowning are highly inaccurate. Why is that?

Lets consider a simple financial view: 

• Lebanese bank deposits are around $170 billion. 
• Bank Du Liban (BDL) has borrowed from the banks $110 billion.
• Government debt is around $90 billion. 
• Local loans and international investments are around $40 billion, thus they won't be able to liquidate them easily.
• The law requires a bank to keep only 10% of their deposits, meaning banks in Lebanon have no more than $20 billion in their safes.

Yes, we are heading for a crisis, banks cannot get their money from the central bank as this money has been spent by irresponsible and corrupt governments and ministers for the past 30 years.

Right now we stand against two options, bankruptcy or haircuts.

Bankruptcy means that the government will fail to pay it's dues for investors thus will reach out for the help of the world bank who will definitely demand highly increasing taxes in order to guarantee and secure the payment of its loans. 

Haircuts means the government along with the central bank will chose to cut a certain percentage from large bank accounts. For example if a 40% cut was to be made on a $1 million account, it will become $600 thousand. Knowing that $90 billion are within 1% of the depositors. Such an action would have a good effect in enhancing the economy and reducing the dept.

If it was up to me, I would definitely vote for haircuts.

Wissam 

Lebanon's riots, will winter win?

There's no doubt that the year 2019 should be called the year of protests. Different countries around the world are witnessing a major breakout in outraging crowds who are demanding governments to step down or make corrections. People have grown sick of their economical conditions and won't agree to tolerate their rulers anymore.

A quick look at the Arabic world you'll find most protests were caused by bad living conditions in which countries such as Sudan, Iraq, Lebanon, and Egypt have been suffering from for the past few decades. The devastating living conditions are a result of accumulated corruption, bad management, and a lack of a proper judicial system. Moreover corrupt governments seem to live in denial in these countries thinking that people won't have the courage to stand against them.

Apparently and thanks to the social media that had helped in bringing everyone closer and spread news faster. Simple protests have turned into riots and those riots are turning into revolutions that could overtake governments.

Sudan was one of the countries that was able to force a 30 year ruling tyrant to step down after the army realized that suppressing the protesters didn't prevail.

Iraq's government decided to remain after agreeing with all the parties that they are best fit to rule and face the protesters with extreme violence through sanctioning the riots at any cost. With more than 90 killed so far the protesters don't seem to be giving up or going home anytime soon.

Lebanon and for the first time in its history in witnessing united protests all around the country with no differentiation among religion, sects, or parties. People have grown tired of their deteriorating economical conditions and government officials' corruption which became unbearable for the past few years especially due to the decreasing economic progress and the huge rise in unemployment. The protesters have succeeded to overthrow the government and are currently demanding the formation of a new ministry with professional personnel such that they shouldn't be corresponding to the current parties in the country.

The Lebanese government has tried since the first day of the revolution to sanction the protests using force on several occasions with no success so far. However, now that winter has come and Lebanon is known for it's rainy season, everyone seems to wonder whether the protesters can challenge the difficult weather and continue with the revolution! or will they give up to the rain and cold and allow the production of a political government that doesn't differ from its precedent.