(ADDS details on reform measures)
May 20 (Reuters) - Lebanon's government foresees cancelling "a large part" of the Central Bank's foreign currency obligations to commercial banks and dissolving non-viable banks by November, according to a financial recovery plan passed by the cabinet on Friday.
The document, seen by Reuters and verified as accurate by a minister, was passed by cabinet in its final session hours before losing decision-making powers, following the election of a new parliament on May 15.
It includes several measures that are prerequisites to unlock funds from a preliminary deal with the International Monetary Fund agreed in April that could help pull the country out of a three-year financial meltdown.
The plan foresees a full audit of the Central Bank's forex financial standing by July. Then, the government "will cancel, at the outset, a large part of the Central Bank's foreign currency obligations to banks in order to reduce the deficit in BDL's capital," the document said.
The largest 14 commercial banks, representing 83% of total assets, would also be audited. Viable banks would be recapitalized with "significant contributions" from bank shareholders and large depositors.
The plan said it would protect small depositors "to the maximum extent possible" in each viable bank, but did not lay out a minimum amount to be protected - unlike draft plans.
Non-viable banks, however, would be dissolved by the end of November, it added.
It also said the government would unify the official exchange rate, ending a system in which the government offered various exchange rates for different operations.
Lebanon's local currency has lost more than 90% of its value since its economic decline began in 2019.
In April 2020, Lebanon's cabinet endorsed a recovery plan that was then torpedoed by powerful political parties, the Central Bank, and commercial banks, who disputed the distribution of losses.
This April, the Association of the Banks in Lebanon (ABL) rejected a draft government recovery plan that it said would leave banks and depositors shouldering the "major portion" of a government-estimated $72 billion hole in the financial sector.
A spokesman for the association said it "did not meet yet to discuss the decision of the government, therefore ABL still endorses its last statement in this regards."
Lebanon's banks have been major lenders to the government for decades, helping to finance a wasteful and corrupt state that tipped into financial meltdown in 2019. (Reporting by Timour Azhari, Laila Bassam, Lina Najem, Writing by Maya Gebeily; Editing by Hugh Lawson)