BEIRUT, April 4, 2022 (Xinhua) Lebanese Deputy Prime Minister HE Al-Shami said on Monday that his statement in a televised interview yesterday (Sunday) that the state is bankrupt and so is the Central Bank has been “taken out of context”, while Central Bank Governor Riad Salameh denied the bank’s bankruptcy.
Al-Shami told the Beirut newspaper, An-Nahar, that his speech was part of a context in which he was answering a question regarding the contribution of the state and the central bank to bearing losses.
Al-Shami asked, “The talk is fragmentary, and I fear that there is a bad intention behind it. My conscience is clear, and we are working with all our energies to complete an economic recovery plan and to conclude an agreement with the International Monetary Fund as soon as possible.”
“We are in a difficult financial situation, and we have defaults on debt repayments and other problems that we hope to address through appropriate reform plans, but this does not mean declaring bankruptcy,” he said.
Al-Shami denied that the statement was “a prelude to an official declaration of bankruptcy by the concerned authorities.”
For his part, Prime Minister Najib Mikati said in a brief statement in response to a question regarding the confusion caused by the Deputy Prime Minister’s statement, “As I understood from the Deputy Prime Minister that what he took from his speech was fragmentary, and he meant what he said was liquidity, not solvency.”
Al-Shami had said in response to a question in a televised interview, “The losses will be distributed to the state, the central bank, banks and depositors, but the state is bankrupt, as is the central bank, and the loss has occurred, and we will seek to reduce losses for people.”
For his part, the governor of the Central Bank clarified in a statement in response to what Al-Shami said that the state and the Central Bank of Lebanon are bankrupt, and that what is being circulated regarding the bankruptcy of the Central Bank is incorrect.
He added, “Despite the losses that afflicted the financial sector in Lebanon, which are being addressed in the recovery plan that is currently being prepared by the Lebanese government in cooperation with the International Monetary Fund, the Central Bank is still exercising its role and will continue to do so.”
Lebanon is going through the worst economic and financial crisis in its history, and the World Bank has classified it among the three worst crises in the world since the mid-19th century.
For nearly two years, banks have imposed strict restrictions on the withdrawal of deposits in foreign currency, and placed ceilings on the withdrawal of funds in Lebanese pounds.
In March 2020, Lebanon announced the “suspension” of the payment of all dues of Eurobonds in foreign currencies, while stressing that it was seeking to negotiate the restructuring of external and internal debts amounting to nearly $90 billion in light of a financial crisis that extends foreign currency reserves.
The share of Lebanese banks is regarding half of the Eurobonds, estimated at regarding 30 billion dollars.
The International Monetary Fund had expressed its willingness to help Lebanon develop an integrated recovery program that would enable it to face the current financial and economic crisis, including reforms in public finance, the banking sector, the central bank, and structural structural reforms, including reforms related to poverty alleviation, governance and electricity.
Lebanon is suffering from the collapse of its local currency at a time when the country is hit by intertwined political, economic, living and health crises that have led to an increase in the poverty rate to 82% with the exacerbation of unemployment and inflation and the erosion of incomes and savings amid an unprecedented rise in prices with a shortage of fuel, medicines and infant formula.