The Governor of the Banque du Liban, Riad Salameh, revealed that the central bank will start operating at the price of 15,000 pounds once morest the dollar, starting from the first of February 2023, and circulars 151 and 158 will become 15,000 instead of the 8,000 and 12,000, starting from the first of February. Salama said that today we have entered the stage of unifying exchange rates, and this started with the customs dollar, which was decided by the Ministry of Finance, along with other fees and taxes.
And the work of the circulars will remain in effect unless the Capital Law is voted on, then we will cancel all these circulars and become governed by interaction between depositors and banks according to the Capital Control Law.
In response to a question regarding the reality of the exchange rates, starting in February, Salameh answered to Al-Hurra channel, within the Lebanese scene program with Mona Saliba, that we will have two prices of 15,000 and exchange rates, so unifying the exchange rate cannot be achieved in one fell swoop, so this will be the first stage until it becomes the exchange rate that determines price. And whether this measure will lead to a raise or a decrease in the exchange rate, he said that the market is then the one that determines according to supply and demand, but the Banque du Liban will be on the lookout. For example, today there are 70 trillion Lebanese pounds in the market, and we can collect all the pounds when we decide, because the markets know this thing, and if we decide, we can put a billion dollars to drain the market of pounds.
Salama considered that the exchange rate today is considered liberal, as transactions take place at fluctuating prices, and even the price of gasoline follows the market price. But even if the price becomes volatile, it is forbidden to witness large fluctuations.
And the Governor of the Banque du Liban said, We are trying through circulars to manage the crisis, and the crisis was also facing challenges outside the scope of the Banque du Liban, and the most important event that happened was the cessation of paying Lebanese foreign bonds that largely isolated Lebanon from the financial markets and made it difficult for dollars to enter Lebanon. So did Covid, which affected the world economy as a whole.
He explained that, according to recent statistics from the Banque du Liban, it was found that there will be a growth in the Lebanese economy in the year 2022, at around 2%. And the import movement rose, and we witnessed an economic movement last summer. The problem is in the public sector, which creates a burden on the economy. He stressed the importance of addressing the situation in the sector at a time when we only see an emphasis on the private sector and the banking sector, while neglecting the required reforms in the public sector.
Regarding financing the three-fold salary increases of public sector employees, he said that this is the responsibility of the state, not the Bank of Lebanon. Therefore, what is required is reform steps first and securing revenues for the state to finance these increases.
Before the increase, salaries were equal to one trillion and 300 million pounds, and they became equal to 3 trillion and 300 million, meaning that the Banque du Liban will pump, during the next 3 months, with retroactive effect, 340 million dollars.
And on how to secure this amount, he replied: We developed our methods through our dealings with the market through banking and other methods to secure dollars without weakening the central bank and in a way that does not lead us to the worst.
He explained that the external assets of the Banque du Liban are 10 billion and 300 million dollars, which can be dealt with abroad, except for gold. We do not call this a compulsory reserve, but rather external assets that we can dispose of abroad on a budget of 15 billion and 200 million. That is, there is the ability to move 10 billion and 300 million externally.
From the beginning of the year until today, the assets of the Banque du Liban have declined by only 2 billion and 500 million dollars, and this means that financing has been secured in the private sector and the public sector, and it has endured the decline in the euro exchange rate because we have euros in our budget.
He stated that the IMF had advised that the increases in the public sector should be studied, meaning that the increases would affect working employees, but there are employees who may be outside the country. Therefore, a review of the way the state is administered is necessary, as the Bank of Lebanon is not the only one capable of solving everything.
According to Salama, today, because of the increases, we need an additional 3 trillion and 300 million pounds. Imagine if we did not have Circular 161, how would the exchange rate of the dollar become once morest the pound?! Today, on the contrary, because many dollars will fall into the market, the dollar exchange rate is supposed to decline or stabilize.
And regarding how he secured dollars, he answered, We have our ways to intervene in the market, but contrary to what they say, we do not withdraw dollars and keep them, but rather redistribute them, and this distribution goes to people and not to importers and traders, as was the case before, i.e. during the subsidy period. He said that we have our plan to secure a salary increase, but in the first stage we will pump dollars, following which we will find ways to secure alternative dollars, but this does not obviate the need for reforms.
Salameh confirmed that he would not finance the purchase of fuel for electricity from the reserves of the Central Bank, and that the government is studying the possibility of opening credits with subsequent payment following six months, and will agree with us on how to secure support for these credits, provided that their source is not from the reserves of the Central Bank. These amounts can be secured through collection. We think they can collect something like $300 million.
Regarding the dissolution of the Board of Directors of Al Baraka Bank, Salameh said, It is not the Bank of Lebanon that takes this decision, but rather the Supreme Banking Authority, following several sessions and following listening to them. He stressed that what is required is the application of the Banque du Liban’s circulars, and banks that do not apply the generalities are referred to the Higher Banking Commission, which is an independent body from the Banque du Liban, and its decisions are not subject to review. He said that the bank has a shortage of liquidity and a shortage of capital. He explained that the appointment of a temporary manager at the bank is not intended to bankrupt the bank. We hope that the interim director will be able to secure the balances and that this attempt will be successful.
He stressed that the same reasons apply to Federal Bank, and I cannot say more because of the existence of privacy, but what is certain is that the goal is not to bankrupt these banks. In response to a question regarding whether he expects to reduce the number of banks in Lebanon following the restructuring, he said, “We believe it will shrink, but not significantly, because this matter depends on the ability of bank owners to capitalize them.”
Regarding the fate of the deposits, Salama said, “We have endured all the negative publicity in order not to bankrupt the banks and to save the deposits of depositors.” He added that what is required to return deposits is to secure liquidity and create an economic movement to repay deposits. This is what they call the recovery plan that the state is supposed to undertake. Regarding the plan presented by the government of Prime Minister Mikati, which talks regarding securing the first hundred thousand dollars from the deposit, Salameh said, This is a plan to manage the payment of deposits, but in order to pay deposits, we must first secure liquidity. He added that the Banque du Liban did everything to preserve deposits by not bankrupting banks.
In another context, Salama hoped to close this stage of his life following the end of his term on July 31, and said that he did not appear before Judge Ghada Aoun in the cases brought once morest him because Judge Aoun judged me even before she listened to me and from political or ideological backgrounds or certain interests. I am ready to appear before a judge who has no prejudices once morest me.
Regarding the cases filed once morest him abroad, he denied the existence of lawsuits and said that there is a group in contact with a group in Lebanon that provided news and carried out media campaigns to keep pace with these news, and the public prosecutor opens investigations, as happens in any country.
And whether he would reveal some names following the end of his term, he said, “I am committed to the law and to Article 151 of the Monetary and Credit Law, which prevents me from disclosing what I learned even following the end of my term.”
