That an official source from Banque du Liban tells to ‘Reuters’ yesterday that the bank is “considering lowering the mandatory foreign asset reserve level in order to maintain subsidies for essential imports in the coming year” cannot be taken lightly.
Perhaps the alarm bells have already sounded over what is left of the deposits of the Lebanese people, as Riad Salameh met with concerned ministers in the caretaker government on Tuesday. One of the options being taken into consideration was reducing the foreign currency reserve requirement from 15% to around 10-12%.
The source said: “Foreign exchange reserves currently amount to about $17.9 billion, leaving only $800 million available for fuel, wheat, and medicine subsidies. That amount would run out by the end of this year.”
In an attempt to delay massive societal explosion, authorities and the central bank seem to have agreed to continue subsidizing basic imports through next year by decreasing the level of required foreign exchange reserves. Meaning, the government would spend 3% to 5% more of the total mandatory reserve assets belonging to the Lebanese depositors; according to a BdL official in his statement to Reuters.
Economic expert Dr. Gabi Bejjani warned that in the absence of serious reform, all negative scenarios are plausible. Lebanon could even surpass the Venezuelan scenario if bold action is not taken.
In a radio interview, Bejjani held judgement on BdL’s move to reduce required reserve levels pending confirmation and more clarity on how the funds will be used. On the current dollar exchange rate, he pointed out that: “There is no set ceiling/floor in light of the absence of official supply and demand figures or any proposed solutions.”
On the other hand, Riad Salameh had since come out and denied the news published by ‘Reuters’ yesterday. He asserted that: “The story about decreasing the required foreign exchange reserves published by Reuters is unfounded. However, if such a measure were to be taken, the funds will be released from the central bank to their holders which are the banks, and will not be used for other purposes.”
