Chapter

LEBANON

Author(s):
International Monetary Fund. Monetary and Capital Markets Department
Published Date:
September 2000
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Status Under IMF Articles of Agreement
Article VIIIDate of acceptance: July 1, 1993.
Exchange Arrangement
CurrencyThe currency of Lebanon is the Lebanese pound.
Exchange rate structureUnitary.
Classification
Conventional pegged arrangementExchange rates are market determined, but the authorities may announce buying or selling rates for certain currencies and intervene when necessary in order to maintain orderly conditions in the exchange market. Banks are allowed to engage in spot transactions in any currency except in Israeli new sheqalim.
Exchange taxNo.
Exchange subsidyNo.
Forward exchange marketForward operations are allowed, provided that a minimum margin deposit of 20% is constituted for each operation.
Arrangements for Payments and Receipts
Prescription of currency requirementsNo.
Payment arrangementsNo.
Bilateral payment arrangements
OperativeBilateral trade agreements are maintained with Egypt, Iraq, Jordan, Kuwait, the Palestinian Authority, Saudi Arabia, Sudan, and the Syrian Arab Republic.
Administration of controlNo.
International security restrictionsNo.
Payment arrearsNo.
Controls on trade in gold (coins and/or bullion)The importation, exportation, and domestic sale of foreign gold coins require a certificate issued by the Office for the Protection of the Consumer that indicates the gold content and weight.
Controls on exports and imports of banknotesNo.
Resident Accounts
Foreign exchange accounts permittedYes.
Held domesticallyYes.
Held abroadYes.
Accounts in domestic currency convertible into foreign currencyYes.
Nonresident Accounts
Foreign exchange accounts permittedYes.
Domestic currency accountsNonresident nonfinancial entities may hold accounts in Lebanese pounds freely. However, effective February 2, 1999, banks and financial institutions are prohibited from opening debit or credit accounts (including fiduciary accounts) in Lebanese pounds for nonresident banks, financial institutions, and money dealers.
Convertible into foreign currencyYes.
Blocked accountsNo.
Imports and Import Payments
Foreign exchange budgetNo.
Financing requirements for imports
Advance import depositsImporters must place with banks a prior deposit of 15% of the value of the LC in the same currency as the LC.
Documentation requirements for release of foreign exchange for importsNo.
Import licenses and other nontariff measuresAll imports from Israel are prohibited. Additionally, certain commercial entities listed under the Arab Boycott List are banned from trading with Lebanon.
Negative listImports prohibited year-round include live chickens, all chicken meat, except for chicken nuggets, fresh liquid milk, yogurt, spring onions, cauliflowers, cabbages, carrots, parsnips, broad beans, green peppers, spinach, olives, zucchinis, parsley, coriander, watercress, lamb’s lettuce, spearmint, potatoes, green almonds, pine nuts, citrus fruits, bananas, figs, grapes, apples, peaches, plums, green plums, sharon fruits, jujubes, strawberries, quinces, apricots, cherries, pears, thyme, olive oil, and pickles.



Imports prohibited during a specified period of the year include tomatoes, cucumbers, eggplant, green beans, peas, watermelons, muskmelons, onions, garlic, and corncobs. Imports of various seeds (citrus, apple, olive, and nut) and various juices (apple, orange, and lemon) and of certain finished goods, wires, cables, cement, veterinary vaccines, and fertilizers require a license.
Import taxes and/or tariffsLebanon uses the Harmonized System Tariff version 96. Customs valuation is on the basis of c.i.f. value; customs duties are generally ad valorem. The rates vary between 2% and 105%. There are preferential duty rates for goods imported for industrial, agricultural, or public use. In addition to ad valorem duties, the following other methods are used: (1) the bracket-based calculation in the case of cars, when the value of a car is divided into three brackets and the total duty is the sum of the duties applied at cash rate; (2) duties calculated on the basis of units of measure, such as weight or volume (e.g., gasoline); (3) combined duty is calculated on an ad valorem and specific basis, so that the higher amount is collected (e.g., tropical fruits and chickens). In addition, excise duties are collected on tobacco, cement, fuels, and cars.



Effective January 1, 1999, Lebanon applied the Arab Free Trade Area Convention.
State import monopolyImports of some goods are reserved for the government.
Exports and Export Proceeds
Repatriation requirementsNo.
Financing requirementsNo.
Documentation requirementsNo.
Export licensesExports of arms and ammunition, narcotics, and similar products are prohibited.
Without quotasYes.
Export taxesNo.
Payments for Invisible Transactions and Current Transfers
Controls on these transfersNo.
Proceeds from Invisible Transactions and Current Transfers
Repatriation requirementsNo.
Restrictions on use of fundsNo.
Capital Transactions
Controls on capital and money market instruments
On capital market securities
Shares or other securities of a participating nature
Purchase locally by nonresidentsDifferent ceilings are imposed on nonresidents’ shares in companies ranging from 51% to 100%, depending on the nature of the company. Any investor acquiring more than 5% of a bank’s category C shares needs the prior approval of the Banque du Liban (BL).
Bonds or other debt securities
Purchase locally by nonresidentsForeign financial institutions need the BL’s approval when purchasing treasury securities denominated in Lebanese pounds or CDs from the BL, and also when transferring the foreign exchange. The same regulations apply for private persons purchasing treasury securities.
Purchase abroad by residentsResidents may purchase debt securities from abroad freely. Banks and financial institutions, however, are only allowed to purchase bonds issued by G-10 countries.
On money market instruments
Purchase locally by nonresidentsThe same regulations apply as for bonds and other debt securities.
Purchase abroad by residentsThe same regulations apply as for bonds and other debt securities.
On collective investment securitiesThe transfer of shares in excess of 10% per person of a collective investment company is subject to prior BL approval.
Purchase locally by nonresidentsYes.
Sale or issue locally by nonresidentsYes.
Controls on derivatives and other instrumentsEffective December 28, 1999, the issuance and trading of derivative products require prior BL approval.
Sale or issue locally by nonresidentsYes.
Purchase abroad by residentsThere is no control on purchasing derivatives or any financial instruments from abroad. Banks, however, unlike financial institutions and brokerage firms, need the prior approval of the central bank to engage in derivative transactions for their own account.
Sale or issue abroad by residentsThe same regulations apply as for purchases abroad by residents.
Controls on credit operations
Commercial credits
By residents to nonresidentsYes.
Financial credits
By residents to nonresidentsYes.
Controls on direct investment
Inward direct investmentAll participation in the financial sector and in the holding companies related to banks needs prior approval from the BL. Any investor acquiring more than 5% of a bank’s category C shares that are traded in the market needs prior approval of the BL.
Controls on liquidation of direct investmentNo.
Controls on real estate transactions
Purchase locally by nonresidentsThe right to acquire real estate by non-Arab foreigners requires a license from the Council of Ministers. Arab nationals do not need a license; nevertheless, a ceiling on the total area that can be acquired is imposed.
Controls on personal capital movementsNo.
Provisions specific to commercial banks and other credit institutionsEffective December 28, 1999, banks have to inform the Banking Control Commission about any guarantee on derivative transactions. These guarantees should not exceed 7% of the bank’s equity.
Borrowing abroadEffective October 29, 1999, for commercial banks, the volume of debt instruments in foreign exchange should not exceed 4% of total deposits in foreign currencies as of the end of the previous financial year; for investment banks, the limit is 6%.
Lending to nonresidents (financial or commercial credits)Banks are prohibited from extending credits in Lebanese pounds for nonresident banks and financial institutions. This control does not apply to guarantees issued by nonresident banks and financial institutions as collateral to loans in Lebanese pounds, provided that such loans are for commercial or investment activities in Lebanon. In addition, the net debtor interbank position between a Lebanese bank and its affiliate or sister company abroad should not exceed 25% of core capital.
Differential treatment of deposit accounts in foreign exchange
Reserve requirementsDeposit accounts in foreign exchange are exempted from reserve requirements.
Liquid asset requirementsEffective March 18, 1999, liquid assets in foreign exchange should not be less than 30% of the total clients’ deposits of all maturities, net interbank credit accounts, CDs, bonds, and subordinated loans with a maturity of less than one year.
Investment regulations
Abroad by banksBanks need the prior approval of the central bank to acquire shares in foreign financial institutions.
In banks by nonresidentsForeigners’ participation in Lebanese banks is limited up to two-thirds of capital. Foreign banks may establish fully owned branches subject to central bank approval.
Open foreign exchange position limitsRegardless of resident/nonresident assets or liabilities, banks may maintain a trading position (total open position less total structural position) in foreign currency of up to 5% of the core capital of banks, and a global position (total trading position, short or long) of up to 40% of core capital. Structural positions are long-term positions representing foreign assets in foreign currencies.
On resident assets and liabilitiesYes.
On nonresident assets and liabilitiesYes.
Provisions specific to institutional investorsNo.
Other controls imposed by securities lawsYes.
Changes During 1999
Nonresident accountsFebruary 2. Banks and financial institutions are prohibited from accepting fiduciary deposits in Lebanese pounds for nonresident banks, financial institutions, and money dealers.
Imports and import paymentsJanuary 1. Lebanon applied the Arab Free Trade Area Convention.
Capital transactions
Controls on derivatives and other instrumentsDecember 28. The issuance and trading of derivatives requires prior BL approval.
Provisions specific to commercial banks and other credit institutionsMarch 18. Liquid assets in foreign exchange should not be less than 30% of the total clients’ deposits of all maturities, net interbank credit accounts, CDs, bonds, and subordinated loans maturing in less than one year.



October 29. For commercial banks, the volume of debt instruments in foreign currencies should not exceed 4% of total deposits in foreign currencies as of the end of the previous financial year; for investment banks, the limit is 6%.



December 28. Guarantees issued on derivative transactions should not exceed 7% of the bank’s equity.

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