Lebanese central bank strike ‘shut down local banks’

Employees at the Central Bank of Lebanon returned to work today (May 7) after a two-day strike shut down large parts of the country’s banking industry.

Staff went on strike on May 4 over rumours Lebanon’s government was considering cutting their salaries. The employees voted today to return to work, but said they would vote again on May 10 to decide whether to resume striking.

Lebanese central bank employees are paid independently of government employees. Observers of Lebanon have said this arrangement has allowed the central bank to continue functioning when the government has failed to agree a budget.

Lebanon’s government is now considering severe cuts to spending. The country has a debt-to-GDP ratio of approximately 140%, one of the highest in the world. Several local reports have said online documents are circulating that claim to show the Lebanese cabinet’s plans for fiscal austerity.

Local media said central bank staff believe the cabinet may put the central bank under the control of the finance ministry, and then cut employees’ salaries.

The Lebanese cabinet released a statement on May 6 saying the rumours were based on “unfounded and incomplete” information.

Finance minister Ali Hassan Khalil tweeted that the “special regime” for the central bank would remain in place. “All the talk about a project for a change in the legal relationship between the ministry of finance and central bank is purely fabrication,” he said on May 4.

Lebanese banks were forced to close by the strike action, as was the country’s stock exchange, which is owned by the central bank. The exchange remained closed today as a result of the strike, but issued a statement saying it would re-open on May 8.

The central bank has played a key role in recent years in helping the government cope with its major budget deficit. However, the International Monetary Fund warned earlier this year that the debt burden was unsustainable, saying “significant fiscal adjustment is inescapable”.