After enduring one of the world’s most severe financial crises for six years, Lebanon’s cabinet has approved a draft law known as the “gap law,” which aims to facilitate the return of depositors’ funds. This development comes as the Lebanese economy grapples with the aftermath of a currency collapse that saw the Lebanese Lira lose an astounding 98 percent of its value since 2019. The crisis has led to widespread bank restrictions, effectively locking depositors out of their accounts and, in some cases, prompting desperate actions to access their own money.
Key Provisions of the Gap Law
The legislation, pending the signatures of Prime Minister Nawaf Salam and the President before parliamentary debate, proposes a structured reimbursement plan for depositors. Individuals who deposited up to $100,000 will receive their funds back within four years, a significant improvement compared to previous proposals that extended repayment over more than a decade. Critics, however, highlight that earlier discussions under former Prime Minister Hassan Diab suggested depositors could reclaim up to $500,000.
Fouad Debs, a lawyer and member of the Depositors Union, expressed disappointment, stating, “This was probably the biggest lost opportunity, and it was done to protect the banks.” Moreover, the law aims to initiate a full financial audit of the banking sector, which Debs emphasizes is crucial, given the discrepancies between banks’ claims and state records.
Concerns and Criticism
Despite the potential benefits, the draft law has faced significant backlash. The reimbursement cap of $100,000 applies per depositor rather than per account. Consequently, individuals with multiple accounts exceeding this amount will receive only the capped figure in cash, while the remainder will be compensated through bonds backed by the Central Bank of Lebanon.
Under the current draft, banks are only responsible for covering 40 percent of withdrawals, a point of contention given their substantial involvement in the financial crisis. Critics argue that bankers and politicians aligned with them are lobbying to protect their interests, while ordinary depositors continue to bear the brunt of the situation. According to Debs, “Depositors should be last on the list to have to pay.”
In total, estimates indicate a financial gap of $70 billion between what banks owe depositors and what the financial system can realistically pay out. The state is expected to cover this deficit, raising concerns about public funds being used to pay back large depositors and foreign vulture funds rather than aiding the broader population.
International Perspective
The International Monetary Fund (IMF) has weighed in on the situation, aligning with civil society in questioning the fairness of the proposed law. The IMF has urged that depositors should not be required to pay before bankers, highlighting the need for a more equitable approach. Debs noted, “The IMF’s position shows how greedy and vicious the ruling elites are here.”
As Lebanon navigates this critical juncture in its economic recovery, the outcomes of the debate over the gap law could significantly impact the financial landscape for millions of citizens. The final decisions made in parliament will determine not only the future of depositors but also the broader economic stability of the nation.
