The World Bank has said that assertions by Lebanese politicians that deposits kept in the country's collapsed banking sector are sacred are "cruel" because they "flagrantly contradict the reality."
Lebanon is in the third year of a financial meltdown that has left eight in ten people poor and which the World Bank says is both deliberate and may be one of the three worst in modern times.
"Political slogans for the sacrosanct of deposits are hollow and opportunistic; in fact, the constant abuse of this term by politicians is cruel," the World Bank said in a report released Tuesday.
"Not only does it flagrantly contradict reality, it prevents solutions to protect most, if not all small and medium depositors, in dollars and in cash," the report said.
The report notes losses in the financial sector, estimated by the government at more than $70 billion, should have been accepted at the beginning of the crisis by bank shareholders and large creditors "who have profited greatly over these 30 years from a very unequal economic model."
It explores whether the country's economic model since the early 1990s amounted to a Ponzi scheme, a type of investing scam which secures returns for investors with money taken from new investors.
"Public finance in post-civil war Lebanon has been an instrument for systematic capture of the country’s resources, as it served the interests of an entrenched political economy," it said.
"Excessive debt accumulation was used to give the illusion of stability and reinforce confidence in the macro-financial system for deposits to continue to flow in," it remarked.
"Lebanon’s depression — deliberate in the making over the past 30 years — has hollowed out the state of the provision of basic services to its citizens," it added.
A Lebanese government spokesperson did not immediately respond to a request for comment.
The report analyzes the impact of Lebanon’s erratic macro and structural policies on the "failed" provision of key basic services to the population.
"The current crisis aggravated long prevailing and serious gaps in the financing of those basic public services: Water, Electricity, Transport, Health, Education and Social Protection," said the World Bank.
"The successive shocks that hit Lebanon since 2019 affected both the supply and demand sides in critical sectors. The crises revealed the fragility of Lebanon’s service provision model, itself a product of elite capture of State’s resources for private gains."
"The weakening of public service delivery was therefore a conscious effort made to benefit the very few at the expense of the Lebanese people. Citizens end up double paying and receiving low quality product or service," it noted.
"The impact is also highly regressive as it affects middle- and lower-income groups much more significantly."
"Lebanon must critically adopt -now- and efficiently implement a comprehensive program of macro-economic, financial, and sector reforms that prioritize governance, accountability and inclusiveness," it urged.
"The earlier these reforms will be initiated, the less painful the cost of recovery will be on the Lebanese people."
