Lebanon's Central Bank Riad Salameh on Tuesday said that he is opposed to a haircut being imposed on depositors, and that he hopes that Lebanese will recuperate their money - though warning that this may take time.
Speaking on Arab News' French edition, Salameh said he supports French President Emmanuel Macron's proposal for a central bank audit by experts from the Banque du France, the French central bank.
In July, it was reported that Salameh had inflated the central bank's assets by over $6 billion in 2018. Beginning in 2016, a series of unprecedented and shadowy financial engineering mechanisms were used to prop up the country's economy, with recent findings highlighting the extent of the unorthodox financial system.
Salameh, in the same interview, said the central bank cannot use its obligatory reserve to finance trade.
“Once we reach the threshold of these reserves we are obliged to stop providing finance,” he said.
The country’s foreign reserves have remained critically low for a nearly a year now, and, in March 2020, the country defaulted on its $1.2 billion Eurobond payment, citing the need to pay for essential goods. The central bank had said that it would only honor the official pegged exchange rate for imports of wheat, medicine, and fuel. Food imports are now brought in at a rate more than double the pegged rate of 1,507 Lebanese lira to the US dollar.
As the country’s banking system slips further into chaos, the long-serving central bank governor also said he opposed a haircut on depositors.
However, because of the rapid devaluation of the currency and a series of ad hoc capital controls on bank accounts, Lebanese have already seen the value of their savings plummet.
Salameh said the intention is for depositors to recuperate their money, although he also said it could be a while before the money is returned.
Lebanon is currently in the midst of its worst economic crisis since the end of its 15-year civil war in 1990. A deadly explosion at the Port of Beirut August 4 that left 181 dead and vast swaths of the city destroyed as added insult to injury, with the economy expected to sink further into recession following the blast.