
What you are going to read was written in 2011, nine years ago! If a 23 year old student presenting a paper for the Arab Open University could manage to get all dots together and tell the future of banking and economy in Lebanon, it means that they all knew!

I summarized a thirty page project in few pages to prove that the road was clear and they kept walking! I did not put my recommendation in this summary. It will be published in a different paper since many factors have increased, changed and piled up the complexity. As a Systems Practitioner I have a different way in writing reports. 
I would like to thank Dr. Saher Annan, Dr. Fadi Hachem, and Dr. Yara Abdalla for standing by me in the original paper submitted 9 years ago.
# Background:
For the past 20 years, the Lebanese government has been dependent over banks to afford liquidity to go forward with the Lebanese economic cycle. And by its turn the banks have found it very profitable to lend the government at a very high interest rate and here is where our complexity started. The government know it is in no shape of borrowing money from the banks to absorb its liquidity from the market, although it is in real need of the money and there are no foreign funds, and the economic status in the country is in retreat, the government might face a huge problem to increase taxes and knock down everybody else or face the problem alone. But the banks, the government, and the citizen are now stakeholders in one system, so everybody would get hurt no matter what. What a mess??
The total sum of subscription in the seven-year issuing with an interest of 7.90% stayed undercover, and for no reason, since the Lebanese central bank didn't announce the details of the closing of this issuing . This meant it to be the main provider of cash for the Lebanese treasury in order to pay its debt which has reached its due date in the near future. It is said that the issuing  has the highest income over Lebanese grounds, which is supposed to have a big deal of attention, since the 1 year bonds are 4.79% and the 2 year bonds are 5.34% and the 3 year bonds are 5.94%, and finally the 5 year bonds are of interest of 6.18%. The increase of interest rate in Lebanon doesn't come to restrain inflation, like what is happening in the developing countries, but to create a certain attraction to the Lebanese liras in the present situation that the country is passing through, which made the risks of investments in the Lebanese bills greater, till it reached 340 points, so it is a cost the Lebanese economy has to bear inside the frame of monetary balance. And this makes the cost of treasury indebted bigger. (Lebanon Banking Goodbye to Great Rates,2011)
Lebanese banks, during this period has an accumulating redundancy of liquidity in LBP of an estimated cash of 15 billion in USD, which cannot be really employed in the Lebanese economy, due to the bad performance of the Lebanese government. And since the government is not capable of assimilating this extra cash in the public debt, it has started to advertise for the public private partnership, as an alternative to suck up this liquidity, which gives the banks a great deal of income, better than that of interest from banks, but this put the state and the consumers on a cost that is higher than the cost of dept.
The PPP project could be an answer in one lace and a curse in another, since what would really happen is a huge “garage sale” of what the state owns, so it can get rid of costs over practicing its duties in health care, education, security, communication, electricity, water and transportation, etc… We should not forget the world financial crisis that proved even biggest companies can become bankrupt. If such companies own everything in Lebanon, what would happen to our financials, jobs, taxes, and government policies if exited? 
Not to mention, Arab funds and foreign funds are now paused because everybody is trying to handle their own problems, the entire region is on fire, no country is prepared to lend us money. 

# Tutor Report:
As a summary before going to discussion and analysis, I must brief the aspects of my chosen mess. There is a very strong dependency between the treasury, central bank and Lebanese banking sector. The government is in huge debt to the banks and has used the banks to acquire money for expenditure and for other depts. The banks see this very profitable and have been there for the state as much as they pleased, but due to this huge debt the government has to stop borrowing money from the banks to reduce liquidity excess, and to minimize the greater risk of reaching a time when it is unable to secure its loans considering internal corruption and loss of money as well as absence of international funds. Lebanese consumers, clients to these banks, will have trouble paying loans, due to daily increase of prices and decrease of market opportunities, thus decrease of consumption rate and return on taxes, which is the money needed by the state to give back to the banks.

# Contextualizing:
The excess liquidity which is generated by the artificial big interest rate, costs about 2 Billion Dollars, a burden the Central Bank of Lebanon (BDL) has to bear. We are talking about 15 billion of excess liquidity in the banking sector. BDL has to take it out of the market by issuing CD at high interest rates. Thus taking out excess liquidity is money wasted for eternity! This money could have been used in many investments with better results.
As we have mentioned before, Lebanon is having this great deal of  deposits since banks are offering high interest rates. Any reduction of interest over treasury bills would cause banks to offer less interest rates to depositors, since there will not be any advantage in paying high interest rates to clients.
An article in the "Executive Magazine" reflects thoroughly upon this situation. 
"Earlier this year, the association of banks in Lebanon decided that rates banks offered should be lowered, as paying out their current interest was no longer sustainable. But in a free market it is the prerogative of banks as to what rate to offer, even if this costs the institution to do so. (If you are getting 5.3 percent on three-year local treasury bills, why then why are you paying depositors 5.5 percent?), said Freddie Baz, Chief Financial Officer at Bank Audi. “It is because of idiotic competition to attract clients, banks are shooting themselves in the foot". (The Executive, 2011)
It is important here to comment over the effects of rapid reduction in the interest rates on LBP since the government can't handle it anymore. The first thing that could be damaged is the currency's stability, since a lot of money might be converted to US dollars, or flee to more secure, profitable markets, none mentioning the portion of Lebanese people who live out of the high interest rate after depositing there retirement money. I think that the Association of Banks in Lebanon should go in public and convince 60 and 70 year old people to open new business later this age.
It is important to point to what the Minister of Finance said about Lebanon issuing bills in foreign currencies with over than $ 1 Billion and has a maturity in the middle of May. She added: "it is predicted that the public debt will rise to 55 Billion USD in 2011, and if there are no actions taken it would become 65 Billion USD in the next three years. Anyway Lebanon had sold 1.2 Billion USD in foreign currencies for 10 years in 2011, and it attracted buyers three times the value of the issue. Also, Lebanon refunded over  800 Million USD in last November which maturity was in 2018 with an interest of % 5.5 and the rest would be in 2022 with an interest of % 6.10" (Samira Awwad, 2011).
Anyway these external funds flowing into the banks in Lebanon are not reliable for making state projects or for the economy to be put at stake. It is just providing unusable liquidity because money is entering the Lebanese system because of the high interest rate offered. They will leave as soon as they start getting less interest returns.
In order to relieve themselves of the burden of liquidity, banks are offering special loans on all what a customer can imagine. The banking sector even give loans to travel and see the world! But CEOs are failing to project the future. In less than 10 years people will not be able to pay back, because of inflation, unemployment, immigration, drastic decrease of foreign investments and political instability. Even the state will not be able to pay its debt for reasons discussed earlier. In all cases, if monetary policy stays on hold, there will be failure to cut spending and excessive loan growth that would add inflationary pressure. 
Also concerning the liquidity of LBP, Raya Hassan commented on the last bills issued in LBP were only replacement for bank owned CDs. And the last resort would be to take a loan from BDL. 
We can conclude that liquidity of LBP is still there, as the treasury bills issued were to repay a maturing portion of the public debt. So what is happening is that the government is borrowing from the market to repay the market in high interest of course. Ironic isn't it?! 
The consumer protection agency revealed that the size of expenditure over luxurious products and services was 60%. **But 50% of Lebanese citizens live on an income of $350/month, (why using dollar? We do We do We do not know when will the peg stop).** Compared to the extremely high inflation rates and expenses of primary goods, one can ask how did the 60% figure come to the scene. This high consumption rate comes from Bank loans and from people borrowing money from each other, which is also not a healthy situation. So what could happen to the banking sector if this rate goes down for the sake of low purchasing power? 
Banks might have numbers showing they are profiting for the time being, but any turbulence, will shoot inflation and unemployment of the charts, taking cash flow statements with them. 
Unemployment in 2010 was 20% in youth. Isn't it weird for an economy that has a financial sector of 110 Billion Dollars, to have high unemployment rate? Yet these young people get to be those 60% of consumers who borrow money! These same individuals get housing loans, in a real estate sector that has gone booming since 2007 with fake exponential prices. Increasing unemployment and inflation will decrease demand and threaten loan payments. It very important to mention that most people bring fake income declarations that they have a 2 million LBP income to manage to get a loan! (CIA,2011)
Here we come to US threat to Lebanese banks! We already know that the Lebanese Canadian Bank was shut down and accused of money laundry. What might happen if the US starts pushing over Lebanese banks one by one or all of a sudden under the same excuse? The political issues and arms of Hezbollah are known. But what if they decided to punish the country and forbid the sector from dealing with US dollars? The entire system would collapse.  The state is absent of course, and might be happy it won't repay debt. But hello! Most politicians are bank owners!
Our corrupted parallel economy will be the future, but not what our economy should be. 

The Merger of Banks and Government in Lebanese Economy


استيقظ اللبنانيون منذ بضعة اشهر على ازمة تهدد جنى اعمارهم و تعب سنينهم. هذه الازمة المصرفية و المالية و الاقتصادية الفريدة من نوعها في العالم من جهة حجمها و نوعها ليست وليدة 17 تشرين الأول و لا ثورة اللبنانيين المجيدة٬ بل هي صنيعة سياسات مالية و اقتصادية وافقت عليها معظم القوى السياسية على مرور 30 استفحلت اخر هذه السنوات. هذه السياسات المبنية على تغطية الفشل من مكان الى اخر دمرت الاقتصاد اللبناني لدرجة انها بخّرت اموال الناس. كيف اختفت اموالنا؟ اين ذهبت؟ هل يمكن اعادتها؟

لا يختلف اثنان أن اموالنا ليست موجودة و ان كل المؤامرات التي حاكها البعض عن ان المصارف قادرة على اعطائنا اموالنا تلاشت امام وقع الكارثة. لنقم بجولة صغيرة:

ذهبت في يوم صيفي٬ الى البنك لتفتح حساب بعدما بعت ارضك الجبلية٬ فأودعت 100 الف دولار فيه على امل ان تأخذ فائدة بحدود 5%. اطمأنيت على اموالك و ان المصرف قادر على الوفاء بوعده باعادة اموالك في كل لحظة. وصلنا الى سنة ال2016 ٬ السنة المفصلية في تاريخ لبنان حيث ان الدولة كانت غير قادرة على دفع ديونها فطلبت من المصرف المركزي الرفع٬ حاك الحاكم الاوضاع في رأسه٬ فاما ان يفرط الوضع اما ان يدفع بالمشكلة الى الامام. فبدأ بعمل الهندسات المالية و هنا بدأ السطو على اموالكم.

بدأ مصرف لبنان يشتري الدولار من البنوك بفوائد خيالية وصلت الى ال25% و بدأ البنوك ببيعه من اموالكم فالبنك لا يضع الاموال في الخزنة بل يستثمرها و بدل ان يستثمرها في الاقتصاد استثمرها في الدولة المفلسة الفاسدة بفائدة مرابي. ارتفعت الفوائد على القروض و على الودائع٬ و اصبحت ال100 الف الدولار الموضوعة في البنك ذاك اليوم الصيفي تأتيك بفائدة اكبر وصلت الى 20% على المبالغ الكبيرة. لم تسأل من اين يأتي البنك بهذه الدولارات فأنت على ثقة انه قادر على "طباعة الدولار". تراكمت الفوائد في البنوك فطالبت المركزي باموالها و المركزي طالب الدولة و الدولة غارقة في الفساد فوقع المحظور و كبرت الهوّة و ضاعت الاموال. هنا يجب ان تعلم ان مدخول لبنان من العملة الصعبة هو من خلال المغتربين و هو غير ثابت لذا لم تقدر البنوك على الايفاء بوعودها الخيالية (الفوائد).

اين ذهبت هذه الاموال؟ يتكلم البعض ان الودائع الموجودة في لبنان وصلت الى 160 مليار دولار فأين ذهبت؟

اولا الدولة: ان فساد الدولة و هدرها للمال العام الذي انتج حوالي 80 مليار$ دين ٬ قسم منه من البنوك و الذي دُفع مراراً من اموالنا هو السبب الاول الذي اضاع جنى اعمارنا.

ثانياً مصرف لبنان: فالمركزي تدين من المصارف للدفاع عن الليرة و تمويل الدولة و يحدد تقرير شركة لازارد خسارة المصرف ب40 مليار$.

ثالثا البنوك: صدقوا ان البنوك خسرت اموال ففي الوقت التي كانت تدين مصرف لبنان كانت تعطي وعود كبيرة اي ان الكلفة زادت بشكل كبير. علما ان البنوك و في حين تراجع ارباحها زادت مردود المساهمين فيها.

هذه الثلاثية اضاعت اموالنا بشكل ممنهج ففي كل يوم كانت الدولة تفسد دولار واحد كانت تسحب هذه المنظومة حوالي ال0.8 $ من حسابات الناس عن طريق البنوك و المصرف المركزي طامعة الاولى بفوائد كبيرة متناسية المخاطر. اللآن ايمكننا استعادة امولنا؟

البعض يربط استعادتنا لأموالنا بالمال المنهوب و هذا امر صحيح و لكن ليس كاف. فاموال البنوك تفتقد للوجود الحسي اي الاوراق النقدية٬ لا اعتقد انه من الممكن استرداد اموالنا من المصارف في القريب حيث اننا بحاجة لضخ كمية كبيرة من الدولارات تقارب ال62 مليار$ في الاقتصاد للبدء بعملية الاستعادة و هذا امر غير ممكن في الةقت الحالي حيث ان المصدر الوحيد للأموال هو صندوق النقد و هو بحدود ال 10 مليار. لذا يجب اعادة علاقات لبنان الدولية و يجب تقديم الاصلاحات المطلوبة على كافة الصعد الادارية و المالية و الاقتصادية و المصرفية و تشجيع الصناعة اللبنانية التي ستكون مصدر ثابت للدولارات.

المسؤولون ثلاثة: السلطة المصرف المركزي البنوك٬ جميعهم يجب محاسبتهم و اصلاح المؤسسات فيهم. و الحل يبدأ بالشباب اللبناني و ابداعه و ابتكاره.

اين ذهبت اموالنا؟


بعد الانفجار المفجع الذي ضرب عاصمتنا بيروت و الذي ادى الى محو المرفأ الاساسي للبنان و حجم الدمار الذي خلفه في بيوت
الأهالي، لا يجب الوقوف متأملين المشهد بل حان وقت العمل.

في البدء يجب فتح مرفأي صيدا و طرابلس لإستيراد ما نحتاجه من مواد طبية و غذائية و مواد أولية للصناعة. تجهيز مطارين آخرين
لإنزال المساعدات الانسانية، لإستعاب اكبر عدد منها في وقت قصير، حيث ان مطار رفيق الحريري الدولي لن يكون كافٍ.

الاستعانة بالقطاع الخاص الداخلي و الخارجي لتجهيز هذين المرفأين، و المطارات الأخرى، لذلك على الدولة الآن ابرام اتفاق مع
صندوق النقد فلا الدولة قادرة على التمويل و لا الدول ستمول دولة متقاعسة غير مسؤولك و فاسدة.

تأمين مصادر للفيول و المازوت لكي لا نقع في العتمة، و الزام الشركات الخاصة بوقف التخزين و حصر المازوت بالمولدات و
المستشفيات.

يجب على البنوك و المصرف المركزي، اعادة فتح ابوابهم و تقليص اكثر ما يمكن من استعمال العملات الورقية و تشجيع المواطنين
على الانتقال إلى cashless economy للتخفيف الضغط على المصارف. على مصرف لبنان ان يفتح الاعتمادات المطلوبة لمواد
العمار و الزجاج.

على المواطنين اللبنانيين مساعدة الناس لإيجاد منازل، فلا تتفاءلوا لن يرجع احد الى منزله في بيروت قبل اشهر، لذلك يجب تأمين
المأوى لكل من شردته يد اللامسؤولية. و يجب أن نعلم ان من تشرد، شُرد من وظيفته و من ماله لذلك لا يمكنه ان يتكلف أعباء سكنه.

عسى هذه الفاجعة تولد لبنان الجديد من تحت الرماد، لبنان نبنيه بلا انظمة بائسة، و فاسدة و جاهلة. رحم الله كل من استشهد اليوم، شهداء
اللادولة.

Articles

The Merger of Banks and Government in Lebanese Economy

اين ذهبت اموالنا؟

اقتصادياً ماذا بعد النكبة