US Markets

Lebanese central bank can't use obligatory reserve to finance trade -governor

Credit: REUTERS/Mohamed Azakir

The Lebanese central bank cannot use its obligatory reserve to finance trade once it reaches its minimum threshold, governor Riad Salameh was quoted as saying on Tuesday.

Adds quote, details, context

BEIRUT, Aug 25 (Reuters) - The Lebanese central bank cannot use its obligatory reserve to finance trade once it reaches its minimum threshold, governor Riad Salameh was quoted as saying on Tuesday.

In an interview with the French edition of the Saudi-owned Arab News, Salameh also said he supported a proposal by French President Emmanuel Macron to send experts from the French central bank to audit the Lebanese central bank.

An official source said last week Lebanon's central bank, Banque du Liban (BDL), could only subsidise fuel, wheat and medicine for three more months, as critically low foreign currency reserves dwindle.

The source said the bank would end the subsidies to prevent reserves from falling below $17.5 billion.

Other sources had in July estimated that the reserves stood at some $18 billion, before the massive Aug. 4 Beirut port blast that killed at least 180 people and wrecked swathes of the city.

The aftermath of the explosion compounded a financial crisis that, since late 2019, has slashed the value of the Lebanese pound on the parallel market, hitting imports as dollars grew scarce. Inflation has soared and poverty has worsened.

The official pegged rate of 1,507.5 Lebanese pounds to the dollar has remained available to subsidise the key imports of fuel, wheat and medicine.

"BDL is doing its best, but it cannot use the banks' obligatory reserves to finance trade," Arab News cited Salameh as saying in comments published on Tuesday. "Once we reach the (minimum) threshold of these reserves, we are forced to stop financing. But we are in the process of creating others means of financing."

The intention is for depositors to recover their money, he said, adding that this could take time.

Lebanese banks have frozen savers out of their dollar deposits and blocked transfers abroad since late last year.

(Writing by Tom Perry Editing by Samia Nakhoul and Mark Heinrich)

((thomas.perry@thomsonreuters.com; Reuters Messaging: thomas.perry.reuters.com@reuters.net))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Latest Markets Videos

Reuters

Reuters, the news and media division of Thomson Reuters, is the world’s largest international multimedia news provider reaching more than one billion people every day. Reuters provides trusted business, financial, national, and international news to professionals via Thomson Reuters desktops, the world's media organizations, and directly to consumers at Reuters.com and via Reuters TV.

Learn More