“The main goal today is to preserve the money of depositors by making sure banks won’t go bankrupt. As long as the banking system exists, that means the funds are available,” Lebanon’s Central Bank Governor Riad Salameh said in an interview with Al Hadath TV channel on Monday.
“The banking system today is not effective yet it hasn’t collapsed until now because banks didn’t go bankrupt,” Salameh said, noting that he had been confirming the stability of the U.S. dollar exchange rate based on the country’s reserves in foreign currencies.
“However, several problems and incidents happened in Lebanon, namely the cessation of payment of foreign dues, banks were closed for three weeks, the COVID-19 crisis, the Beirut port explosion and the failure to form a government for more than 10 months.”
Salameh also pointed out that $30 billion have been withdrawn from banks from all currencies since October 2019 until today, and hard currencies have also entered Lebanon.
“Forming a government today will lay the basis for restoring confidence in the Lebanese pound, and the international community’s trust is the basis for getting out of the crisis and this (can be done) through the formation of a cabinet that approves reforms.”
“Making pretexts that the Central Bank of Lebanon is the crisis and is capable of solving the crisis is not true,” he said, adding that transfers abroad do not go through the Banque du Liban.
“Nearly $3.5 billion were withdrawn between October 2019 and March 2020,” Salameh said, noting that $230 million were transferred for students abroad within one year.
“Defaulting on (Lebanon’s dues) without negotiations has had a major role in the U.S. dollar crisis. Preserving the bank’s liquidity was necessary; otherwise it would have declared its bankruptcy and the depositor would have lost his money.”
On June 29, 2020, Lebanese banks raised the exchange rate to 3,850 pounds per dollar for withdrawals from U.S. dollar accounts, as a liquidity crunch erodes the currency’s value.
Last March, the Lebanese pound plummeted to an all-time low record of 15,000 to the dollar on the black market after the concerned parties failed to form a new government. It is currently being traded at nearly 13,000 against the USD.