Salameh: $2bn Still Remain for Subsidies, Lebanese’s Deposits Not in Central Bank

Central Bank governor Riad Salameh said on Tuesday the crisis of ending subsidies on the import of basic goods can be solved without reducing the foreign reserves if the new government takes the necessary measures.

In remarks to the US-based Arabic-language satellite TV channel, al-Hurra, Salameh described as “exaggerated” the reports claiming that deposits of the Lebanese people in local banks have “evaporated.”

He stressed that the dollar liquidity crisis in Lebanese banks began a gradual decline, revealing that the depositors' money was not in the "central" bank.

He said a year ago until today, deposits worth 30 billion dollars have been withdrawn from Lebanese banks, 20 billion dollars of which have been used to cover debts.

"The debt portfolio decreased significantly in the banking sector from 55 billion to 35 billion dollars today,” he said.

“The second part was used to buy real estate, while the third part was taken in cash, and we estimate that approximately 10 billion dollars are with the Lebanese,” he added.

On the problematic issue of lifting subsidies on the import of basic goods, Salameh said we are keen that the Lebanese remain capable of buying medicines, fuel and foodstuff at the official dollar rate of LBP 1500.

He said it is up to the government to decide how to rationalize imports, stressing the need to set specific approaches that allow the Lebanese to get their basic needs, while concurrently preserving the bank’s foreign reserves.

“The bank still has two billion dollars before touching the foreign reserves,” he said, noting that forming a credible government that inspires confidence in creditors helps restore liquidity back to the country.

On the multiplicity of trading exchange rates of the dollar and the black market, Salameh said that “the bank does not interfere in cash. The only experience we took is through Sayrafa with a volume not exceeding $150 billion over a period of 6 months.

“How can we affect a market we know nothing about its location and the security services are chasing it?" he asked.

On whether the central bank plans to peg the dollar rate, the Governor assured that the exchange rate is usually determined between the finance minister and central bank governor, “we will wait to see the policies of the future government,” he said.

On forensic audit into the bank’s accounts, Salameh assured: “We submitted all the bank’s accounts to the finance ministry which in turn handed them to the forensic audit companies. We will hand over the state’s accounts after we received a written request from the Minister of Finance and a recommendation of the Parliament."

Salameh described as “baseless” the reports claiming the bank allegedly covered money laundering operations for Hizbullah.