Lebanon’s banks have been in crisis for months as depositors demand access to their savings.
Lebanese banks have decided to close their doors to clients indefinitely, two bankers have told Reuters, amid an unprecedented wave of hold-ups by frustrated depositors seeking access to their savings.
The two sources told the news agency on Friday that banks would continue urgent operations for clients and back-office services for business, but front-office services would remain suspended.
Banks closed for about a week last month in similar circumstances, but reopened at the beginning of October to allow employees to withdraw salaries.
In mid-September, a young Lebanese woman, Sali Hafiz, was lauded as a national hero after forcing staff at a BLOM Bank branch in Beirut to give her thousands of dollars from her own account by waving a replica gun in order to fund her sister’s cancer treatment in hospital. She told Al Jazeera that her actions were a response to the bank “stealing” her money.
Although she was not the first depositor to hold up a bank to demand access to their savings, her case triggered a snowball effect with multiple hold-ups taking place since then as the population grows more frustrated over strict measures preventing depositors from accessing most of their dollar savings.
Just last week armed depositors stormed three commercial banks in different locations across the country.
A politician, Cynthia Zarazir, entered a bank on Wednesday demanding access to her savings, although she was unarmed.
Banks started imposing such informal capital controls following an economic downturn which began in 2019. Since then, the local currency has lost about 90 percent of its value, the country’s gross domestic product has contracted by more than 40 percent and inflation remains in the triple digits.
The restrictions mean that depositors are only allowed to withdraw a limited amount of money per day, and most withdrawals of foreign currency have to be carried out at an exchange rate unfavourable to depositors, meaning that depositors will lose almost 80 percent of the value of the money in their savings if they withdraw it.
The World Bank defined Lebanon’s economic crisis as the worst the world has witnessed since the 1850s. The government has been slow to implement much-needed reforms, further exacerbating the country’s economic meltdown, according to the International Monetary Fund (IMF).
Those reforms are key to unlocking an IMF bailout to help ease the crisis, which economists argue has been caused by decades of wasteful spending and corruption.
Lebanon’s bank association has previously called on the government to enact formal capital controls to replace the informal controls banks adopted in 2019, but parliament has repeatedly failed to pass the law.