Spat with Lebanese lenders could sink IMF deal

On Wednesday, Lebanon’s economy minister told Reuters that Lebanon’s $3 billion contribution to the International Monetary Fund to assist combat the financial crisis might be part of the country’s strategy for dealing with the significant financial sector damage.

The Union of Banks of Lebanon (ABL) claimed over the weekend that it has rejected the government’s newest draft of a recovery plan, which calls for some depositors to be bailed out, others to be slashed, and bank shareholders to inject new capital.

“You need the government, the central bank and the banking sector to be on the same page. If they’re not all on the same page, you can’t do that,” said Salam, who is also a part of Lebanon’s IMF negotiating team.

However, ABL described the idea as “disastrous,” claiming that it would leave banks and depositors responsible for a significant amount of the government’s $72 billion deficit.

Although the government does not require ABL approval to carry out a plan, analysts believe that backing from the banking sector could help find a way out of the issue. Banks have suggested that the government compensate for the loss by privatizing public assets.

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