Lebanon central bank governor Salameh says there is a plot against him, deposits safe
Lebanon's under-fire central bank governor Riad Salameh said on Wednesday that there is a coordinated campaign against him and that accusations regarding spending levels were false, the latest comments in an ongoing row over who is to blame for the country's worsening economic crisis.
In a televised speech, Salameh insisted that he had hidden no information from the government and that there is a campaign to blame him. Some government officials, including Prime Minister Hassan Diab, have blamed Salameh for the economic crisis which continues to deepen. A spokesperson for the Iranian-backed Hezbollah has said the central bank governor is not solely responsible for the country’s problems.
A recent string of bank burnings in the country, concentrated in the northern city of Tripoli have underscored acute economic pain and growing discontent with the situation in the country.
Protesters in #Tripoli have begun burning banks as hunger is on the rise. Lebanon's second largest city is one of the poorest areas in the country, and life has become more difficult for many there. Read more here: https://t.co/6gEwad1yh6 pic.twitter.com/Ilpp32UXUH— Al Arabiya English (@AlArabiya_Eng) April 28, 2020
Its economy is forecast to contract 12 percent in 2020, according to the International Monetary Fund.
As depositors’ fears intensify about their money in the banks, Salameh said that there is no need for a haircut on those deposits, and told Lebanese that their bank deposits are still there.
However, due to ad hoc capital controls, Lebanese have been unable to easily access funds in their bank accounts for months, and rising inflation has seen the value of the local currency sink from its pegged rate of 1507 lira to $1 to around 4,000 lira to $1.
This inflation has seen the prices of staples rise, but Salameh said in his speech that the prices of fuel, wheat, and medicine are not increasing due to the bank’s actions. A circular issued by the bank ensured that these three provisions could still be imported at the official exchange rate.
Salameh also said that the bank was trying as much as possible to control the price of the lira at foreign currency shops. A series of circulars issued attempted to regulate the exchange rate, but inflation continues to rise.
On Monday, Lebanon’s central bank said foreign exchange dealers could not sell US dollars for more than 3,200 lira to the dollar. More than 10 currency exchange dealers were arrested for failing to comply with the new rate.
Also on Monday, local newspaper an-Nahar reported that the Lebanese central bank set an exchange rate of 3,800 lira to the dollar, up from 3,625 on Friday, to be applied at money transfer firms and applies to remittances by Lebanese sending money home via wire transfer.
Meanwhile, a third circular set the rate for lira withdrawals from US dollar accounts at 3,000 lira to $1.
The central bank head said that the financial engineering schemes the bank conducted over the last few years were necessary to buy Lebanon time to implement necessary reforms.
One Lebanese economist previously told Al Arabiya English that had the bank not implemented these mechanisms, the economy would’ve faced today’s problems years ago.
For years, the government has failed to make necessary reforms, including those in its ailing electricity sector, to attract foreign investment. Over $11 billion was pledged to Lebanon at the 2018 CEDRE conference in Paris that would be unlocked, dependent on reforms.
Salameh said if the government failed to make these reforms, it is not the fault of the central government.
In March, Lebanon defaulted on its Eurobond debt, saying that it needed to preserve the $30 billion it owed to pay for critical imports, like fuel and wheat.
Diab announced April 6 that Lebanon would audit the central bank’s accounts in a bid to show transparency after launching debt restructuring talks with creditors.