Law No. 193 – the Student Dollar Law Analysis
Policy Analysis by Dana El Khoury, Contributor
January 27th, 2021
With everything the Lebanese youth have done to evade falling victim to the repercussions of the Lebanese government’s failures, their actions went unfortunately in vain. Holding a Lebanese passport has not been the most rewarding, with the government incapable of providing the most basic of needs and rights for its people.
Correspondingly, 2020 has proven that the curse of being Lebanese is not restricted between the borders of 10452 km2 of land – it haunts Lebanese nationals wherever they go. The parliament has legislated the transfer of a one-off amount of $10,000 from Lebanon to Lebanese students living abroad on the condition that their enrollment to educative institutions came prior to the year 2020, and that the money transferred is at the bank’s official exchange rate – 1515 LBP to the dollar – despite the street and black-market rate fluctuating to rates up to 10,000 LBP to the dollar (Reuters, 2020).
The Lebanese economy has been subject to massive macroeconomic shocks ever since the 2011 Arab Spring, the Syrian war, and the internal political instability. The worsening economic, social, and political conditions in 2019, triggered by the October 17th Lebanese uprisings, have extended to 2020 and beyond to 2021. The GDP of Lebanon contracted in 2019 by 6.5%, and 2020’s tragic events have only threatened the economic condition further (Nordea, 2020).
In October 2020, the World Bank projected that the Lebanese economy is set to have declined by 19.2% by the end of 2020 (World Bank, 2020). However, a forecast by the International Monetary Fund (IMF) estimated a further decrease in GDP growth by -25% due to the worsening conditions resulting from the global COVID-19 pandemic, and the August 4th explosion in the Beirut port, both of which exacerbated the socio-political and socioeconomic Lebanese plight (International Monetary Fund, 2020).
The Lebanese government has left the previously pegged currency to float at abnormal rates, leading to a massive currency devaluation and a liquidity crunch in the banking sector. Subsequently, Lebanese banks have found no alternative for maintaining their foreign reserves other than increasing restrictions on depositors’ access to their foreign currency reserves – despite the absence of laws implemented by the parliament to back up their decision (Reuters, 2020).
With clientelism and corruption laying the foundation of the Lebanese banking sector’s structure, the elite bribery-oriented class has been capable of transferring its deposits to offshore accounts in the form of foreign investments, while the less-privileged class suffers from the discretionary policies implemented by their respective banks (Hage Boutros, 2020). Alain Bifani, who resigned as director-general of the Ministry of Finance, claimed in July that $5.5-$6 billion had been smuggled outside of Lebanon by the very bankers who prohibit their depositors from withdrawing $100 (Yassine, 2020). The financial discrepancy and inequality between depositors, coupled with the capital controls adopted by Lebanese banks, has left the banking industry paralyzed, and Lebanese nationals with little to no access to their own foreign capital accounts. With the Lebanese pound losing almost 80% of its value, even converting the Lebanese reserves into dollars would leave depositors at a loss with regards to their savings (Perry & Jalabi, 2020).
This reality has rendered Lebanese students abroad unable to paying their tuitions, rent, nor their most basic survival requirements to get-by on foreign land.
With the implementation of Law No. 193 – the student dollar law – the Lebanese government falsely claims that it has done Lebanese students abroad a favor. However, the Lebanese government must be held accountable for the downward spiral it has forced its people to endure. A government merely allowing its people access to their own savings, with so little as $10,000 for survival, must be condemned rather than praised.
This is no time for the youth to escape from the tragedy their ancestors have left them to deal with; it is time for us to fight the injustice we have inherited.
References:
Hage Boutros, P. (2020, July 28). Capital Controls: Depositors More Aggrieved than Ever by the Absence of Relevant Legislation. Retrieved from https://today.lorientlejour.com/article/1227574/capital-controls-depositors-moreaggrieved-than-ever-by-the-absence-of-rel-evant-legislation
International Monetary Fund. (2020). Lebanon and the IMF. Retrieved from https://www.imf.org/en/Countries/LBN
Nordea. (2020). The economic context of Lebanon. Retrieved from https://www.nordeatrade.com/en/explore-new-market/lebanon/economical-context
Perry, T., & Jalabi, R. (2020, August 27). Lebanon Central Bank Urges Banks to Recapitalise, Repatriate Funds. Retrieved from https://www.reuters.com/article/lebanon-crisis-centralbank/update-3-lebanon-c-bankurges-banks-to-recapitalise-repatriate-funds-idINL8N2FT4EN
Reuters. (2020, October 01). Lebanon to allow hard-hit students abroad to get dollars from home. Retrieved from https://www.reuters.com/article/us-lebanon-crisis-studentsidUSKBN26M5VI
World Bank. (2020). Lebanon's Economic Update - October 2020. Retrieved from https://www.worldbank.org/en/country/lebanon/publication/economic-update-october2020
Yassine, H. (2020, July 13). Bifani To Financial Times: Bankers Smuggled $6 Billion Out Of Lebanon. Retrieved from https://www.the961.com/financial-times-bankers-smuggledout-billions/