To ease economic crisis, Lebanon central bank cuts rates

Lebanon’s central bank Thursday told commercial banks to lower interest rates on dollar and Lebanese pound deposits in the latest attempt to ease the country’s worst financial crisis in decades.

The central bank imposed a temporary interest cap of 4 percent on dollar deposits and 7.5 percent on Lebanese pound deposits, according to a circular seen by AFP.

It was the second time in two months that the central bank has taken such a measure.

Earlier in December, it capped interest rates on dollar and local currency deposits at 5 and 8.5 percent respectively.

The latest reduction comes weeks after Lebanon’s finance minister, Ghazi Wazni, called for slashed rates to “spur economic activity and to ease pressure on public finances.”

A banking source close to the matter said the latest central bank measure was part “of a more comprehensive economic rescue plan.”

The source asked not to be named because he is not authorized to speak on the issue.

The new prime minister, Hassan Diab, has said his cabinet would draw up an emergency rescue plan for the country by the end of the month.

The crisis-hit country has debt-to-GDP ratio of more than 150 percent, one of the highest in the world.

It is currently in the throes of a severe economic meltdown and a biting liquidity crunch that has seen banks impose stringent controls on withdrawals and transfers abroad.

Credit rating agencies and economists have warned of dwindling foreign currency reserves that have plummeted in recent months, threatening import payments and a devaluation of the Lebanese pound.

The local currency has lost a third of its value on the black market.