Lebanon needs $ 12 billion to $ 15 billion to jumpstart recovery (central bank)

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Beirut (AFP) – Lebanon needs to receive 12 to 15 billion dollars from its partners to start its economic recovery and consolidate its rapidly declining foreign exchange reserves, Central Bank Governor Riad Salameh said on Tuesday.

Lebanon is grappling with an unprecedented economic crisis described by the World Bank as one of the worst on the planet in modern times.

More than 80 percent of the population lives in poverty, and the currency has lost more than 90 percent of its black market value amid political wrangling that delayed a deal with the International Monetary Fund.

“Our quota in the International Monetary Fund is 4 billion,” Salameh said in an interview with AFP.

“If countries add to it, we could reach $ 12 billion to $ 15 billion, an amount that could help kick-start Lebanon’s recovery and restore confidence,” he said.

Lebanon defaulted on its debt for the first time last year, but political leaders have continued to resist key reforms demanded by donors to unlock the necessary funds.

Meanwhile, the central bank’s dollar reserve requirements have been cut by more than half, according to Salameh, who is widely seen as one of the main culprits of an economic crash many blame on the bank’s policies. central.

“Reserve requirements are around $ 12.5 billion,” which the central bank cannot spend, said Salameh, explaining that an additional $ 1.5 billion in reserves had been released for central bank spending .

Reserve requirements stood at $ 32 billion before the onset of the economic crisis in 2019.

Obsolete exchange rate

Salameh dismissed criticism blaming him for the crisis, saying “without the central bank and its reserves, Lebanon could not have continued”.

“The central bank is dealing with the outcome of the crisis, it is not the one causing it.”

Rapidly dwindling reserves threaten a subsidy program that initially covered fuel, medicine, flour and other key imports before it ran out.

The central bank can afford to finance partial subsidies on a few remaining key imports for “about six to nine months” if no further action is taken to combat the depreciation of the Lebanese pound, Salameh said.

Officially pegged at 1,507 per greenback since 1997, the Lebanese pound has sold nearly 30,000 per dollar on the black market earlier this month, a record high.

The official fixed rate is “no longer realistic,” Salameh said, while explaining that a unified exchange rate would be unlikely without an agreement with the IMF and political stability.

IMF talks

Lebanon began talks with the IMF last year, which derailed amid differences among officials over the extent of financial sector losses.

But talks with the IMF have revived in recent weeks in which Lebanese officials agreed that financial sector losses amount to around $ 69 billion.

“Lebanon is still at the stage of overwhelming numbers,” said Salameh, who is part of the IMF’s Lebanese negotiating team.

“The Lebanese side has not yet presented a plan to the IMF for discussion.”

Salameh, one of the world’s oldest central bank governors, has been the subject of legal investigations in France, Switzerland and other European countries on suspicion of money laundering and illicit enrichment, between Other expenses.

Salameh dismissed the lawsuits against him as unfounded and lacking in evidence, saying they were initiated on the basis of complaints lodged by Lebanese citizens “for reasons which could be political … or linked to certain interests”.

He said a leading financial audit firm had reviewed his accounts at his request and presented him with a report which he then submitted to officials and judges in his country and abroad.

“I am ready to cooperate with all investigations,” he said, claiming that they were based on “fabricated evidence” which gave the blatant impression that he “took all the money from Lebanon and had pocketed it “.

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