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Lebanon under Capital Controls

What CEOs are doing to cope with the crisis

Our cash is tied.

Welcome to Capital Controls world.

As of Yesterday- November 7th, 2019:

  • Banque Libano-Francaise (BLF) is letting you withdraw up to a daily amount of $5K; Credit Libanais up to $2K daily; Bank Audi up to $3K monthly.
  • Most have implemented charges ranging from 2.5 to 5 per mil.
  • You can transfer money out of the country only as a business and in much smaller amounts than you used to (for individuals, the ban is almost complete unless you have a strong argument like medical reasons or tuition fees to pay- if you are lucky).
As of Today- November 8th:
  • Many banks have run out of USD bills

By many standards, we are in the middle of a crisis, we just have not reached its most serious stages yet.

What can CEOs do to adapt to this fluid, rapidly deteriorating situation?

Her is what our clients recommend doing:

  1. Breathe. Your rational thinking is what you need most right; so give yourself a generous deep breath at regular intervals during the day so you make better decisions for yourself and the people whose livelihoods depend on you.
  2. Spend less money on foreign purchases. Now is a good time to go through that Credit Card statement and see what you can cut out. You will need every USD you can save- so kill all unnecessary app subscriptions. If you are locked into long-term contracts, review your Terms & Conditions and see if there are any "force majeure" clauses that can get you out of it. Do you have any consultants overseas? Developers in Bangalore? A marketing agency in New York? Now is a good time to put a pause on all of that.
  3. Pay all local salaries and suppliers in LBP at the local rate of 1515 per USD, if your employee's contracts are in USD. Get comfortable negotiating exchange rates with suppliers who may want to charge you above 1515 LBP per USD.
  4. Pile up on USD. If you have some mandatory foreign payments- make sure you have enough USD to pay for those for the coming few months. Be extra stingy with whatever USD reserves you may have. Some CEOs are maxing out their daily limit to pay for imported goods- this is especially true for retailers. What you don’t want is having to buy USD in the black market at much higher rates when the deadline comes through.
  5. Move your bank account abroad: If you are operating a business with online payments, you may want to set up a company in the US and start getting paid via Stripe.
  6. Generate more sales in foreign currency: this is one of the greatest promises of the digital revolution- now is the time to reinforce your commitment to making it happen.

  7. Defer NSSF (Social Security Payroll) contributions: Despite the current deal by NSSF to have your accumulated fines waived by  85-90% if you start paying your old dues before 31 Dec 2019- the recommendation of most CEOs was to further delay any NSSF contribution payments. 
  8. VAT payment- similar to NSSF; although many CEOs preferred to prioritize this payment over NSSF.
  9. Develop contingency plans for operational blackouts: is the delivery of your service contingent on having continuous; access to a foreign server like AWS? If so, consider alternative payment methods in the event that local credit cards are discontinued.
  10. Become location-independent (e.g the entire workforce can be dispatched to work from home during unrest). If your business is still pure brick and mortar and you have a bulky server sitting in the office. It may be time to join us on the cloud. Literally.

As diverse as the Alex the CFO portfolio may be. From real estate to e-commerce and SAAS, we all push the boundaries of our realities to go beyond.

May the Lebanon which re-emerges be a more hospitable place to pursue your startup dreams.

 

#Believe

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