Lebanon needs $12-15 billion from its partners to jumpstart its economy and shore up rapidly dwindling foreign currency reserves, according to Central Bank Governor Riad Salameh.
Lebanon is mired in an unparalleled economic crisis, dubbed “one of the world’s worst since the mid-nineteenth century” by the World Bank.
More than 80% of the population lives in poverty, and the currency has lost more than 90% of its black market value due to political wrangling that has prevented an agreement with the International Monetary Fund from being reached.
In an interview with AFP, Salameh remarked, “Our quota in the International Monetary Fund is four billion dollars.”
“If nations contribute, we may reach 12 to 15 billion,” he added, “an sum that might assist Lebanon begin to rebuild and reestablish trust.”
Last year, Lebanon defaulted on its debt for the first time, but political leaders have resisted critical reforms sought by donors in order to free needed money.
Salameh, who is generally considered as a primary culprit behind an economic disaster many blame on central bank policies, claims that the central bank’s mandated dollar reserves have been lowered by more than half.
“The mandatory reserves are roughly $12.5 billion,” Salameh said, adding that the central bank has freed up an extra $1.5 billion in reserves for expenditure.
The mandatory reserves stood at $32 billion before the start of the economic crisis in 2019.
Salameh dismissed criticism blaming him for the crisis, saying that “had it not been for the central bank and its reserves, Lebanon would not have been able to carry on.”
“The central bank deals with the outcome of the crisis. It is not the side causing it.”
The fast-diminishing reserves are threatening a subsidy program that had initially covered fuel, medicine, flour and other vital imports before it petered out.
The central bank can afford to finance partial subsidies on a few remaining key imports for “around six to nine months,” if no additional measures are taken to combat the depreciation of the Lebanese pound, Salameh said.
The only new usable foreign currency injections that the central bank has access to come in the form of IMF Special Drawing Rights (SDR) allocations received this summer, a former central bank official and a former adviser to the finance ministry both told AFP.
“We do not know how they are being used as there is a total lack of transparency and disclosure,” the ex-central bank official told AFP on the condition of anonymity.
Officially pegged at 1,507 to the greenback since 1997, the Lebanese pound sold for nearly 30,000 to the dollar on the black market earlier this month, a record low.
The official fixed rate is “no longer realistic,” Salameh said, while explaining that a unified exchange rate would be unlikely in the absence of an IMF agreement and political stability.
Lebanon last year started IMF talks that were derailed due to differences between officials over the size of financial sector losses.
But IMF talks have resumed in recent weeks during which Lebanese officials have agreed that financial sector losses amount to around $69 billion.
“Lebanon is still in the stage of crunching numbers,” said Salameh who is part of Lebanon’s IMF negotiating team.
“The Lebanese side hasn’t yet presented a plan to the IMF for discussion.”
Salameh, one of the world’s longest-serving central bank governors, is facing judicial investigations in France, Switzerland and other European countries on suspicion of money laundering and illicit enrichment, among other allegations.
Salameh dismissed the cases against him as unfounded and lacking in evidence, claiming they were opened based on complaints filed by Lebanese citizens “for reasons that could be political… or tied to certain interests.”
He said that a top-tier financial audit firm had scrutinized his accounts at his request and presented him with a report that he then submitted to officials and judges.
“I am ready to cooperate with all investigations,” he said, claiming they were based on “fabricated evidence” that made it seem as though he “took all of Lebanon’s money and pocketed it.”