Recent statements by Lebanon's central bank governor, Riad Salameh, have been met with positive responses in banking and financial circles, following tensions caused by the divergence between the monetary authority and the financial sector regarding the proposals outlined in the government-approved recovery plan last month. A senior banking official stated to "Asharq Al-Awsat" that Salameh's acknowledgment—based on documented numerical data—of the state's direct responsibility for a financial gap in the central bank's budget amounting to approximately $62 billion, "should realign the framework for assigning responsibilities, contrary to the government's proposal to eliminate amounts from bank deposits and burden them along with depositors with covering these losses."
The official anticipated positive reactions in the currency markets and financial transactions, especially with the extension of measures ensuring liquidity in both cash dollars and Lebanese lira. This commitment reinforces the central bank's pivotal role in managing daily exchanges via the "Sayrafa" platform, which has been bolstered by measures that limit the capacities of speculators and currency traders to exploit it. This has translated into a decrease in daily transaction volumes to around $30 million, while maintaining the dollar exchange rate on the platform below 25,000 lira per dollar.
The banking official also noted that identifying the starting point of the crisis with the previous government's decision to suspend payments on international debt bonds (Eurobonds) would open a significant and complex issue related to the harmful descriptions that have afflicted financial and banking institutions, categorizing them as "zombie" entities. In reality, they, in close cooperation with the monetary authority, have successfully managed to deal with severe issues for nearly three continuous years amid significant state failure in providing any support or assistance, particularly in terms of the deliberate neglect of prioritizing the approval of a law to regulate and impose controls on withdrawals and transfers (capital control), which has contributed to escalating confrontations between banks and their clients.
The official observed that the Association of Banks "is concerned with regrouping its papers based on the governor's disclosures and renewing direct communication later with government officials and parliamentary bloc leaders, aiming to establish a balanced equation for distributing responsibilities and losses through systematic and definitive identification of the size of the financial gap and the necessity of an agreement among the involved parties," namely the state, the central bank, and the banking sector regarding how to distribute burdens and the timeline for accommodating them, alongside a consensus on mechanisms to protect depositors from all sectors, except for what is approved from deductions on achieved interest sums or transfers that raise suspicions of exploiting the crisis.
According to Salameh's estimates, Lebanon will need between $15 billion and $20 billion for its recovery and requires an agreement with the International Monetary Fund (IMF), which will help regain the necessary confidence. He emphasized, on the other hand, that "Mikati's task is not easy; he is trying to find a final solution to Lebanon's crisis, aiming for an agreement with the IMF. No country in the world has punished depositors; we have maintained banks to protect depositors' money."
In conclusion, the banking official considered the figures disclosed by Salameh as "a reference document for determining the effective roadmap for the recovery and revival plan that is expected to secure broader national agreements in support of it, prior to preparing a new final formulation ensuring interactive engagement from the parliament, which is tasked with approving a package of bills listed as preconditions in the initial agreement with IMF staff, primarily the approval of the general budget, capital control measures, amendments to banking secrecy laws, and preparing a law to restructure the banking sector."
The document notes, "Between 2010 and 2021, the energy sector took cash from the central bank amounting to $24.537 billion, while the public sector took $8.320 billion. Financing imports for subsidized goods cost $7.572 billion, in addition to the losses incurred by the central bank from Eurobonds, which reached $7.446 billion. The cost of interest on these funds taken was $14.800 billion." Thus, the state took, under laws over 10 years, $62.670 billion.
Bankers expressed their satisfaction with Salameh highlighting the incorrect government decisions that had consequences for everyone and for trust in the country, arguing that these actions "led to the crisis with the currency," while "those responsible for this are the same ones blaming the central bank and its governor." Salameh clarified that "when the crisis occurred in 2019, the dollar did not rise much, and Lebanese could withdraw their dollars from banks until the Lebanese government decided to stop paying bonds, triggering inflation and a rising dollar." He concluded: "Unfortunately, they managed to create chaos, believing they could establish a better system, but the result was the collapse of the economy and emigration of Lebanese people, and they blamed me."
