Salameh: Foreign currency reserves at $20.9 billion

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In a televised address, Salameh attempted to lay bare the bank’s finances, saying that he provided Prime Minister Hassan Diab with all its accounts on March 9.

by Georgi Azar -Source: Annahar

A file photo of Central Bank Governor Riad Salameh (AP)

BEIRUT: The Central Bank’s foreign currency reserves stand at $20.9 billion, BDL Governor Riad Salameh said Wednesday, as he brushed off the government’s accusation of mismanagement and nontransparency.

In a televised address, Salameh attempted to lay bare the bank’s finances, saying that he provided Prime Minister Hassan Diab with all its accounts on March 9.

“The Central Bank releases its budget every 15 days and gets audited yearly by [accounting organizations] Deloitte and Ernest and Young,” Salameh said.

Salameh jumped to the defense of his “financial engineering” mechanisms used to boost the bank’s foreign currency reserves, which many argue accelerated the collapse of Lebanon’s national currency.

“They bought Lebanon time to enact reforms and finance critical imports,” he said, adding that they paved the way for Lebanon to make it to the CEDRE IV donor conference held in 2018.

Lebanon secured some $11 billion in soft loans and grants at the conference which have not seen the light of day as reform conditions were never met.

He rebuffed Diab’s recent remarks that he was to blame for Lebanon’s financial crisis and abrupt depreciation of its national currency, instead saying that culpability falls on the state’s massive debt burden.

“Lebanon’s trade and budget deficit over the past five years stands at $81 billion,” Salameh said. “This is the catastrophe, not the Central Bank’s accounts,” he declared.

Salameh, who’s been in office since 1993, said the central bank merely acts as a financier for the government as “mandated by law” and had no say in how these funds are spent.

“Yes, the central bank financed the state, but it wasn’t us who spent these funds,” he said, adding that promises of reform were never met.

One of the biggest sources of debt is Lebanon’s state-owned electricity sector, with the accumulated cost of subsidizing EdL amounting to about 40 percent of Lebanon’s entire debt, the IMF said in 2016.

Net transfers to state power firm Electricite du Liban (EdL) now amount to $1 billion-$1.5 billion a year, most of it spent on fuel oil. This is equivalent to about a quarter of last year’s budget deficit of $4.8 billion.

$843 million has been spent so far on oil and other government expenditures, Salameh said, along with another $863 million to secure basic imports like fuel, wheat and medicine. Edl has been under the control of President Michel Aoun’s son in law Gebran Bassil for the better part of a decade.

Speaking to Saudi-owned Al Hadath TV station on Wednesday, the U.S. State Department’s top diplomat for the Middle East specified reforms to the power sector, customs, telecommunications and tax collection in order for Lebanon to regain the confidence of the international community.

Salameh also reiterated that depositors are secured, saying that “there is absolutely no need for a haircut and a haircut should not be adopted.”

He seemed to distinguish between “haircut” and “bail-in,” seemingly arguing that using the word “haircut” since cracks began to show hurt the country’s ability to enact the needed policies from a public perception perspective.

Salameh then presented the example of Cyprus, where some banks resorted to a bail in to ensure that banks’ shareholders and creditors – including uninsured depositors – pay their share of costs.

 

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