Central Bank Governor Riad Salameh, announced that the foreign exchange reserves of the Central Bank decreased by $2.3 billion dollars from the end of 2021 until 15 June 2022, to about $11 billion dollars.
Lebanon had more than $30 billion in foreign exchange reserves when the complex financial and monetary economic crisis began in 2019, but Salameh said the amount is now a third of that.
The central bank’s foreign exchange reserves have declined by $2 billion and $318 million since the beginning of this year until June 15, to reach the current amount of 10.4 billion dollars, budget figures of the bank, seen by Economy Middle East, show. This is a number excluding from the bank’s portfolio of Eurobonds, which the bank specifies in its budget, at a value of $5.03 billion.
In March 2020, Lebanon announced its failure to pay its Eurobonds amounting to $31 billion dollars, of which Lebanese banks held an important part (about $14 billion).
The budget published by the Banque du Liban every 15 days also showed a decline in foreign currency assets over a two-week period by $508.8 million, which is one of the largest decline figures after the Central Bank announced its intervention in the electronic “exchange” platform established by it with the aim of restoring control of the exchange rate in the multiplicity of its prices and the significant deterioration in the exchange rate of the Lebanese pound against the dollar which remained.
Salameh, who is facing a judicial investigation into allegations of misconduct and corruption, said that “the wrong decisions that were taken and which had consequences for all of us and shook the confidence in the country that led to the crisis on the currency, and it is those who did this themselves that now blame the Central Bank and its governor. The bank will work to ease the crisis and the losses on the Lebanese.”
He also pointed out that “the Central Bank is independent of the state and we have paid the price of confrontation in the face of attempts to seize control of it, and the parties are clear to everyone.”
Salameh stressed that without the remittances of expatriates, there would not have been any dollars in the market, but he pointed out that “the economy cannot be based on these remittances alone, but that there must be productive sectors that attract dollars.”
Where was the money spent?
Salameh revealed that the Central Bank prepared a paper explaining where the bank’s dollars were spent. Between 2010 and 2021, an amount of $24 billion and 537 million were spent on the energy sector and the import of fuels for the benefit of Electricité du Liban. Another $8 billion and $320 million were spent on the public sector, and $7 billion and $572 million on subsidized imports.
The state spent $62 billion and $670 million, according to laws approved in Parliament over a period of 10 years. Also, the total losses of the bank from Eurobonds, whose price fell after the announcement of the default, amounted to $7 billion and $446 million.
He stressed that “accusing the Central Bank of speculating on the pound on the black market is absurd. They continue to dry up the Lebanese pound and pay public sector salaries in US dollars, which curbs market manipulation.”
Salameh revealed that the Central Bank of Lebanon will propose to the new cabinet, if it is formed, a law to issue a currency in larger denominations to facilitate the use of the lira in light of the devaluation of the currency.
Being pro banking secrecy
Salameh also said he supports maintaining banking secrecy in Lebanon.
These statements contradicted the position of the Lebanese Deputy Prime Minister, HE Al-Shami, who said that he does not see any benefits to maintaining banking secrecy in the country.
The IMF also set “amending the banking secrecy law to bring it in line with international standards” as a prerequisite for obtaining relief funds for Lebanon.
The government of Premier Najib Mikati has prepared a plan for financial and economic recovery, which is considered a basis for negotiations with the International Monetary Fund. However, this plan has received wide objections from banks and depositors alike, as it bears them the largest share of recorded losses. Consequently, its passage in Parliament will be difficult before it is readjusted in order to distribute the losses fairly. The state will bear part of the responsibility.
