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Lebanon rejects latest financial recovery plan

The Association of Banks in Lebanon said on Saturday it “completely rejects” the government’s latest draft of a financial recovery plan meant to pull the country out of an economic meltdown.

In a statement shared with Reuters, the ABL called the plan “disastrous” and said it would leave banks and depositors shouldering the “major portion” of losses.

The government estimates that the financial sector’s losses amount to $72 billion.

“ABL has assigned its legal advisers to examine and present a range of judicial measures that will allow the preservation and recovery of the rights of the banks and the depositors,” the association said.

Lebanon’s banks have been a major lender to the government for decades, helping to finance a wasteful and corrupt state that went into financial meltdown in 2019.

The collapse has resulted in depositors being shut out of their savings and the local currency losing more than 90 percent of its value. The banking association rejected an earlier draft of the plan in February, saying it would cause a loss of confidence in the financial sector.

The ABL’s approval is not required for the government to begin implementing a plan, but experts say support from the banking sector could contribute to solving the crisis.

The current draft lays out a series of financial reforms, including an overhaul of the banking sector and caps on how much depositors would be able to recover from their accounts.

Earlier this month, Lebanon signed a staff-level agreement with the International Monetary Fund for a 46-month extended fund facility, under which Lebanon has requested access to the equivalent of around $3 billion.

But access to those funds is contingent on enacting a slew of economic reforms and financial sector restructuring.