Slashed salaries, black market rates for dollars, and an inability to access savings are the new normal in Lebanon, as a month of anti-government protests have revealed the scale of the country’s economic distress.

“Open or closed, it doesn’t make a difference. We’re not working anyway,” read signs posted on shuttered shop doors in Lebanon’s northern city of Tripoli on Thursday, part of a general strike marking Lebanon’s Independence Day.

Bond yields have meanwhile skyrocketed from 13% on the eve of the protests to 105% in recent days, Bloomberg reported, putting Lebanon in the three-digit territory of Venezuelan bonds when that country defaulted in 2017.

Protesters on Tuesday blocked the path of lawmakers to parliament, furious over what they believed was an attempt to pass an amnesty bill that would shield political elites from facing snowballing prosecutions charges by a reinvigorated judiciary.

While highways have been largely forced open and schools are back in session after weeks of blocks and closures, banks have been on lockdown for almost the entire duration of the crisis.

Since closing the morning after protests broke out on October 17, banks opened once for a week in November, before closing again amid a chaotic response and haphazard informal controls.

During that first opening, customers filmed Facebook live videos showing tellers refusing their loan payments in local currency and valued clients being told they were better off keeping their money at home, with the incidents going viral.

On November 7, the global credit ratings agency Moody’s downgraded Lebanon’s three largest banks – Audi, BLOM, and Byblos – deep into junk territory, with local currency accounts relegated to Caa2 and foreign currency accounts dropping even sharper, to Caa3.

In the past six months alone, Lebanese have withdrawn at least $3 billion dollars from the banks, preferring to stash their cash at home, the head of the Association of Banks in Lebanon (ABL) told Reuters on Wednesday.

Zero transparency

Lebanese banks reopened this past Tuesday after the ABL announced a $1,000 weekly withdrawal limit and transfers abroad limited to “urgent matters.”

A banking source told Asia Times that urgent matters were being decided on a case-by-case basis, and based on client’s tracks records; for example, annual tuition payments for children studying abroad or companies that regularly import parts or equipment.

There has been scarce public transparency or delineation, however, of what constitutes “urgent matters.”

While regular individuals have had extreme difficulty accessing their savings, government officials have stated that massive amounts of money have left the country in recent days.

“It seems the banking regulations are being applied only to regular people and low-income depositors,” tweeted Lebanese parliamentarian Bilal Abdallah on Thursday.

How else, he asked, could anyone explain the $800 million that was allegedly transferred overseas when the banks were closed?

“You and your colleagues had the power to form a parliamentary committee of inquiry to hold the banks and central bank accountable, but you refused,” tweeted economist Jad Chaaban in response.

The heated exchange comes one year after 855 billion ($570 million) worth of Lebanese pound deposits were reportedly converted to US dollar accounts, contributing to the now snowballing sense of anxiety in the country that Lebanon’s sacrosanct peg to the dollar was destined to slip.

Savings behind bars

In the weeks leading up to Lebanon’s protest movement, depositors were already beginning to encounter difficulties withdrawing dollars from ATMs.

Gas station owners repeatedly threatened strikes over their predicament of being forced to purchase fuel in dollars while receiving payments in Lebanese pounds, leading to panicked nighttime queues during the month of September before the government vowed to fix the prices of key commodities.

While gas stations are required to sell fuel at the official exchange rate (LBP 1507.5 to $1) set by the central bank, unofficial rates were beginning to pop up elsewhere.

Earlier this month, a young woman held a sign outside the popular restaurant chain Paul in the wealthy Gemmayze district of Beirut reading: “Paul cut my wages by 40 percent.”

The image of the lone protester went viral, sending protesters from the nearby downtown to demonstrate outside the restaurant. 

While few have dared to raise their voices in such a public way for fear of losing their jobs, an anonymous survey on the subject revealed that out of 20 respondents, nearly half had experienced cuts to their salaries, one by over 70% and eight between 10-50%.

Lebanese are now scrambling to secure foreign currency, now sold by money changers for as high as 1,950 Lebanese pounds to US dollars, as landlords, universities and heating oil distributors are all demanding payments in dollars.

No soft landing

Lebanon for the past two decades has enforced a peg of its local currency to the dollar, branded as a marker of stability, and one which allowed people to withdraw from ATMs and make daily transactions in either currency without differentiation.

But the peg has become an increasingly costly burden to maintain. Banque du Liban relies on a mechanism known as financial engineering to prop it up; private banks provide the central bank with foreign currency in exchange for immediate profits in Lebanese pounds.

FitchRatings had warned in August that this formula would not hold indefinitely, downgrading Lebanon from B- to a distress grade of CCC.

Until now, a triangle of mutually assured destruction between the Banque du Liban, the banking sector, and the political and business elite has kept the economy afloat. Using a mechanism known as “financial engineering,” private banks provide Banque du Liban with foreign currencies in exchange for immediate profits in Lebanese pounds.

“There’s an idea running around that these dollars belong to the central bank,” Mohammad Al Akkaoui, an economist at Kulluna Irada, a civic organization focused on political reform, told Asia Times back in August. 

“No – these are your dollars, my dollars, my dad’s dollars, and they’re being wasted to maintain a system that has expired.” 

While Lebanon has never defaulted in its history, it has one of the world’s highest debt-to-GDP ratios, more than 150%. The global credit ratings agency Standard & Poor’s in the past week joined Moody’s and Fitch in downgrading Lebanon’s sovereign credit rating to CCC, or junk.

The luxury of interchangeable currencies now appears to be a thing of the past, with banks placing sharp limits on dollar withdrawals, even for US dollar accounts, or refusing them entirely due to lack of liquidity.

“A soft landing is no longer an option,” Akkaoui told Asia Times on Thursday. 

“Now is the time for crisis management. There is a finite amount of dollars remaining in the financial system that have to be utilized in an efficient manner to ensure citizens basic needs.”

Lebanese President Michel Aoun addressed the nation on Thursday night, stressing that any new government would be in a race against time.