Foreign currency corporate loans
to be repaid as contract, not lira
Industrialists and traders associations
denounce Central Bank’s decision
The Central Bank (BDL) has exempted retail and housing loans denominated in foreign currencies from being repaid according to borrowing terms. They are allowed to be repaid in lira based on the official exchange rate (LL1,507). Retail loans include personal, car, credit card, education, and similar loans based on an individual’s credit file.
All other foreign currency denominated loans should be repaid as stipulated in the loan contract according to a circular issued by the Central Bank (BDL). This means that they cannot be settled in lira.
Foreign currency corporate loans provided to non-residents must be repaid only in ‘fresh money’.
The conditions for allowing retail and housing loans to be repaid in lira at the official exchange rate include that the borrower be residing in Lebanon and does not have a foreign currency account at the lending bank that can be used for debt settlement. The exemption from repayment in foreign currencies is capped at $800,000 for housing loans and at $100,000 for retail loans.
The Association of Industrialists (ALI) said that the decision would be a fatal blow to what remains of the productive capacity and sustainability of all business sectors. It said that businesses are already suffering from blocking their bank deposits and the lack of new lending or credit facilities in addition to the impossibility of transferring money abroad or opening letters of credit to import raw materials.
The Beirut Traders Association (BTA) said the decision is unconstitutional and undermines the principle of equality before the law of all citizens. It comes amid capital controls imposed by the banks and the inability of businesses to import in addition to the destructive impact on the economy of the port’s explosion and of the frequent lockdowns, the BTA said. “We were hoping for a package of incentives and financial exemptions, not an aggravation. We will not bear any additional burdens, as our sector is in a state of almost inevitable clinical death,” it said.
Date Posted: Aug 28, 2020