Lebanon’s central bank not bankrupt, governor says

The governor of the Central Bank of Lebanon, Riad Salameh, has denied reports circulating in the country that the regulator is bankrupt.

“What is circulating about the central bank failure is incorrect,” Salameh said in a statement sent to The National.

“Despite the losses suffered by the Lebanese financial sector, which are being addressed by the recovery plan currently being prepared by the Lebanese government in cooperation with the International Monetary Fund, the Banque du Liban continues to exercise the role entrusted to it by virtue of of Article 70 of the Monetary and Credit Law, and will continue to do so,” he said.

The statement comes after Lebanese media reported that Deputy Prime Minister Saadeh Al Shami declared the Lebanese state and central bank bankrupt. Prime Minister Najib Mikati said he believed Mr Al Shami was referring to “liquidity, not solvency”, Reuters reported, citing a statement from his office.

Lebanon is going through its worst economic crisis since independence. The country’s economy contracted by around 58% between 2019 and 2021, with gross domestic product falling to $21.8 billion in 2021 from around $52 billion in 2019, world Bank the numbers show it. This is the strongest contraction on a list of 193 countries.

Lebanon’s economy collapsed after defaulting on around $31 billion worth of Eurobonds in March 2020 as its currency fell more than 90% against the dollar on the black market.

Inflation in the country soared 215% a year in February as the country’s economic collapse deepened and talks with the IMF for a bailout plan continued.

Lebanon needs to implement various reforms and measures, including the restructuring of its banking sector and the reduction of the large public over-indebtedness, to obtain financial assistance from the fund and unlock billions of dollars in aid from donor countries and institutions.

The country’s public debt has risen to $100 billion, or about 212% of gross domestic product, in 2021. This ranks Lebanon fourth in the world in debt-to-GDP ratio, surpassed only by Japan, Sudan and Greece. . , said the World Bank.

Lebanon requested a $10 billion bailout package from the IMF in May 2020. However, talks with the lender have stalled due to infighting between the country’s various political factions and a lack of consensus on the amount of debt and losses on the central bank’s balance sheet.

Lebanon’s economic crisis is expected to rank among the world’s 10 biggest crises – perhaps even the top three – since the mid-19th century, according to the World Bank.

Updated: April 05, 2022, 07:17

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