Lebanon approves key banking secrecy reform amid IMF negotiations
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Lebanon's parliament passes critical banking secrecy amendments demanded by the International Monetary Fund, aiming to unlock aid for its faltering economy.
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Protesting depositors smash the glass facade of a branch of Emirates Lebanese Bank in Dawra, a suburb north-east of Beirut, Lebanon, Thursday, August 29, 2024 (AP)
Lebanon's parliament approved crucial amendments to its banking secrecy legislation on Thursday, a significant step toward meeting the International Monetary Fund’s (IMF) requirements for financial assistance. The reform is part of broader efforts to revive the country's economy, which has been in freefall since 2019.
A statement from Parliament Speaker Nabih Berri's office confirmed the passing of amendments to the law on banking secrecy and related monetary legislation. The changes grant regulatory bodies access to customer banking information, removing prior legal hurdles that protected account privacy.
IMF conditions push Lebanon towards fiscal transparency
The IMF and other international bodies have long insisted on structural reforms, including greater transparency in Lebanon's banking sector, to unlock billions in aid.
These reforms are crucial as Lebanese officials, including Finance Minister Yassine Jaber and Central Bank Governor Karim Souaid, meet with IMF representatives in Washington.
Legal Agenda, a Lebanese non-governmental organization, explained that the amendments now allow regulatory bodies to access customer names and deposit details, as well as investigate suspicious transactions without a specific legal mandate.
The law applies retroactively for 10 years, covering the period from the start of Lebanon’s financial collapse.
Economic crisis worsened by war
Since 2019, Lebanon's currency has lost significant value against the US dollar, pushing much of the population into poverty and restricting access to savings.
The recent Israeli war on Lebanon has compounded economic challenges, with the country now facing urgent reconstruction needs.
Bankers have been accused of enabling elite individuals to transfer large sums abroad during the crisis. The new laws are seen as a step toward holding financial institutions accountable and restoring confidence.
IMF loan agreement hinges on reforms
In April 2022, Lebanon reached a conditional agreement with the IMF for a $3-billion loan, but most of the required reforms remain unimplemented.
The IMF expressed openness to a renewed agreement in February, following discussions with Minister Jaber.
Lebanon's new government has pledged additional reforms, including restructuring the banking sector. Draft legislation for this restructuring was approved earlier this month, signaling further steps toward fulfilling IMF conditions.
Approvals from World Bank
The World Bank has granted Lebanon a $250 million loan to help address chronic power outages exacerbated by "Israel's" war on Lebanon last year, the country’s Finance Ministry announced on Thursday.
The funding aims to support urgent reforms in Lebanon’s electricity sector, which has long suffered from fuel shortages and poor infrastructure.
The World Bank estimates that the country will need approximately $11 billion for comprehensive infrastructure recovery and reconstruction.
Even before the war, Lebanon struggled with outdated energy systems and limited access to imported fuel. The devastation caused by the war has highlighted the need for accelerated reform and external support to stabilize the power sector and broader economy.
'Finally making real strides'
Lebanon had said that it received preliminary approval to increase the World Bank loan from $250 million to $400 million as part of a wider reconstruction funding program valued at $1 billion. The remaining funds are expected to come from international aid partners.
Finance Minister Yassine Jaber and World Bank Regional Director Jean-Christophe Carret signed the landmark agreement, describing it as a crucial step toward addressing Lebanon's power crisis.
"This loan represents a strong boost to the structural reforms Lebanon is implementing in the electricity sector," Jaber said, emphasizing the long-awaited establishment of regulatory frameworks and oversight mechanisms.
"We are finally making real strides toward transforming how this sector is managed."
