BEIRUT, Dec 26 – The Lebanese cabinet on Friday passed a draft law that aims to address a financial crisis that crippled the economy for six years, despite significant opposition to the legislation from political parties, depositors and commercial banks.
The legislation, known as the “financial gap” law, is part of a series of reform measures required by the International Monetary Fund in order to access funding from the lender.
It aims to distribute the massive losses from Lebanon’s 2019 financial collapse between the state, the central bank, commercial banks and depositors, and allow depositors who have been frozen out of their savings to gradually recover their money. In 2022, the government put losses from the crisis at about $70 billion, a figure that is now likely higher.
Cabinet passed the law on Friday with a vote of 13 to 9, facing opposition from ministers across Lebanon’s divided political scene. Dozens of people protested near the government headquarters as cabinet met, saying the law did not protect their deposits. The Association of Banks in Lebanon, which represents commercial banks in the country, has also criticized the draft.
Prime Minister Nawaf Salam defended the law on Friday as a “realistic step,” saying he hoped it would restore trust in the banking system not just among Lebanese, but among Gulf countries who could invest once reforms were in place.
“For the first time, this is a law with accountability,” Salam told reporters.
It will now need to be approved by Lebanon’s fractured parliament, where it may be amended.
Financial reforms in Lebanon have been repeatedly derailed by political and private interests over the last six years, but Salam and Lebanon’s President Joseph Aoun have pledged to prioritise them.
(Reporting by Maya Gebeily, Tala Ramadan and Laila Bassam; Editing by Alexandra Hudson)
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