BEIRUT (Reuters) – Lebanon’s efforts to secure $3 billion in support from the International Monetary Fund to help it deal with its financial crisis could be derailed by divisions over how to deal with massive financial sector losses, the economy minister told Reuters on Wednesday.
The Association of Banks of Lebanon (ABL) said over the weekend that it rejected the latest draft of the government’s recovery plan, which calls for a bailout of some deposits, cuts to others and asks bank shareholders to inject new capital.
“We will not be able to secure a complete deal with the IMF without bank restructuring. It is an important part of the “preliminary actions” the IMF wants Lebanon to take before agreeing to a full support deal, Economy Minister Amin Salam said.
“You need the government, the central bank and the banking sector to be on the same page. You can’t do it if they’re not all on one page,” added Salam, who is also a member of Lebanon’s negotiating team with the IMF.
However, the ABL called the plan “disastrous” and said it would leave banks and depositors bearing the “major part” of what the government says is $72 billion in losses.
ABL approval is not required for the government to start implementing a plan, but experts say support from the banking sector could help find a way out of the crisis.
The banks have said that the state should foot the bill for losses, including through the privatization of public assets.
Lebanon reached a preliminary agreement with the IMF earlier this month that lists a series of so-called prior actions that the fund says must be implemented before it can reach a full deal with the country.
These include the passage of an amended bank secrecy law and the “initiation of a bank-by-bank assessment with external assistance for the 14 largest banks.”