Report: Concerns Rise over ‘Shortage’ in Dollar Reserves
The central bank’s intention to issue instructions to regulate the provision of funds to import fuel, wheat and medicine; in addition to the emergence of a secondary market for the exchange rate of the Lebanese pound to the dollar, have all raised concerns about a shortage in dollar reserves, media reports said on Friday.
On Thursday, the exchange rate of one dollar to the Lebanese pound reached 1,630 LBP.
Lebanon has maintained a fixed exchange rate (1,510) between the Lebanese pound and US dollar.
“The real reasons for the crisis are the (Banque du Liban) BDL's attempt to reduce the snap up to convert from the Lebanese pound to the dollar because this leads to shrinking in the central bank’s foreign reserves, this ammunition is used to defend the Lebanese pound,” said former Economy Minister and banker Raed Khoury in remarks to al-Joumhouria daily.
Khoury said BDL “adopts policies to control the monetary situation in light of the decline in remittances from abroad.”
He said BDL is “buying time in order to preserve the financial system in Lebanon.”
Lebanese media this week reported that banks and money exchange houses were rationing their dollar sales over a feared shortage in reserves.
But central bank governor Riad Salameh on Monday denied that Lebanon was facing a dollar crisis.
BDL said on Tuesday it will issue a circular to regulate the provision of funds to import wheat, fuel and medicine.
Gas station owners announced Thursday an immediate and open-ended strike, saying a shortage in dollar reserves has made it difficult to pay suppliers.
Growth in Lebanon has plummeted in the wake of repeated political deadlocks in recent years, compounded by eight years of war in neighbouring Syria.
Lebanon's public debt stands at around $86 billion -- higher than 150 percent of GDP -- according to the finance ministry.
Eighty percent of that figure is owed to Lebanon's central bank and local banks.
Last month, ratings agency Fitch bumped Lebanon down to "CCC" over what it called "intensifying pressure on Lebanon's financing model".
Standard & Poor's kept Lebanon's "B-/B" rating, but said that could slide over the next year if banking system deposits and the central bank's foreign exchange reserves continued to fall.
In July, parliament passed its 2019 budget, which is expected to trim Lebanon's deficit to 7.59 percent of GDP -- a nearly 4-point drop from the previous year.
Source: Naharnet, Agence France Presse
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