By Tom Perry and Tom Arnold
BEIRUT (Reuters) – Lebanon’s outgoing Prime Minister Saad al-Hariri met President Michel Aoun on Thursday without announcing progress towards forming a new government, as banking sources said most financial transfers out of the country remained blocked.
Already facing the worst economic crisis since the 1975-90 civil war, Lebanon has been pitched deeper into turmoil since Oct. 17 by an unprecedented wave of protests against the ruling elite that led Hariri to resign as prime minister on Oct 29.
Banks reopened on Friday after a two-week closure but customers have encountered restrictions on transfers out of the country and withdrawals of hard currency.
Maronite Christian politician Samy Gemayel warned that the financial system was on the verge of collapse, and urged the immediate formation of a politically neutral government.
A banking source said that generally all international transfers were still being blocked bar some exceptions such as foreign mortgage payments and tuition fees. A second banking source said restrictions had gotten tighter.
The chairman of the Association of Banks in Lebanon said earlier this week the banks were not applying a policy of restrictions “but we are prioritising” after the two-week closure that had led requests to pile up.
Hariri has been holding closed-door meetings with other factions in the outgoing coalition cabinet over how the next government should be formed, but there have been no signs of movement towards an agreement.
Parliament Speaker Nabih Berri, an influential Shi’ite politician, said he insisted Hariri be nominated as prime minister again, saying this was in Lebanon’s interest.
Aoun has yet to formally start the process of consultations with lawmakers over nominating the new prime minister. The presidency said Aoun and Hariri discussed contacts aimed at solving “the current government situation”.
Hariri said his resignation was responding to protesters whose demands include a new government devoid of politicians accused of corruption. Hariri has held two meetings this week with Gebran Bassil, a son-in-law of Aoun and head of the political party he founded.
Both Aoun and Berri are allies of the Iran-backed Shi’ite group Hezbollah, which has not said who it backs to be the next prime minister.
“A HUGE” COLLAPSEAHEAD
Leading Druze politician Walid Jumblatt, who had two ministers in the outgoing cabinet, appeared to take aim at Hariri and Bassil, saying on Twitter that despite the protests and social and economic dangers “they were meeting on how to improve and beautify” a political deal they struck in 2016.
Gemayel, whose Kataeb party was not part of the outgoing cabinet, said the main players had not understood the depth of the protest movement.
“I don’t see any change in the behaviour of any of the main actors after everything that happened,” he told Reuters. “They are still trying to form a government where they can all be happy, and this is not what the people are asking for.”
The economy is choked by one of the world’s largest debt burdens as a result of years of inefficiency, waste and corruption. Growth, low for years, is now around zero.
Capital inflows vital to financing Lebanon’s state budget and trade deficits have been slowing for years, contributing recently to a scarcity of foreign currency and the emergence of a black market for the pegged Lebanese pound.
Gemayel said Lebanon was at the beginning of “a huge monetary and financial collapse”.
“We are heading to a huge problem of purchasing power, a huge problem of inflation, a huge problem of poverty,” he said.
He added that he expected restrictions on financial transactions would increase as banks sought to keep their cash.
Two importers indicated access to finance was not improving.
“So far we are still finding some liquidity to manage some transactions but the cash is being squeezed so we are worried about the longer-term,” said Hani Bohsali, general manager of Bohsali Foods and president of the Syndicate of Importers of Foodstuffs, Consumer Products and Drinks.
A second importer said his bank would not allow him to make any more international transfers.
(Additional reporting by Laila Bassam; Writing by Tom Perry; Editing by Peter Graff, William Maclean)