Lebanese central bank governor refused to end the economic crisis

SINGAPORE – The governor of Lebanon’s central bank told CNBC this week that he wanted to help the country in times of crisis – and he would not resign.

“You can’t resign … in a crisis environment, because it would feel like walking away from the task you have to perform,” said Riad Salameh.

He said, “I don’t want to resign because I am continuing what is going on in my mind as a strategy to get out of this crisis, and every day to disappoint those who spread rumors about my resignation.” I’m sorry, “he said to CNBC’s Hadley Gamble on Monday.

In addition to the coronovirus epidemic and ongoing economic troubles, the country is still recovering from a massive explosion in Beirut last month that is believed to have killed about 200 people. The explosion occurred on August 4 over 2,750 tons of ammonium nitrate kept in an unsafe warehouse.

According to a World Bank report, the explosion is estimated to cost $ 4.6 billion.

The government resigned after resentment over the devastating explosion that left more than 6,000 injured and 300,000 people homeless. Prime Minister Hasan Diab stepped in the wake of the tragedy and attributed the endemic corruption to the disaster.

Former Germany ambassador Mustafa Adeeb was named the new prime minister last week, although many Lebanese are not sure he will bring real changes to the country’s political system.

Salmeh, the governor of the central bank, however, does not bear the responsibility of the Lebanese state.

The last 10 months have not been easy, he noted, pointing to various factors including restrictions on the Lebanese-based bank, a shutdown in the banking sector, government debt default and coronavirus.

Salmeh, defending his efforts, said: “I am the governor, who tried with the means we have to maintain the system, not to destroy the system.”

Riyadh Salmeh, the governor of Lebanon’s Central Bank, speaks during a press conference at the bank’s headquarters in Beirut on November 11, 2019.

Joseph eid | Via AFP Getty Image

The Banke du Liban chief recently said in the report that he had amassed over $ 6 billion in central bank assets in 2018.

Both the Financial Times and Reuters cited financial accounts, and said the central bank recorded an asset that was $ 6.8 billion – or about 10.27 trillion Lebanese pounds – which they called “reliance on financial stability,” or gains made by the government. Described as. It prints money. Central banking experts said the asset was used to hide the loss of loans to the government.

But Salmeh said the country’s crisis was not due to monetary policy decisions. “This was provoked by the other elements that I have listed, and it was my duty to moderate the effects.”

He said that the country’s reserves were growing before its financial crisis began. “Monetary policy was filling the gap that was needed to sustain this country.”

Salmeh also said that the central bank has not created the country’s double deficit – its current account deficit and fiscal deficit – which cost 81 billion in Lebanon. He said, “We did not create a shortfall in the government, we have always spoken of deficiency.”

Lebanon has long been struggling with an economic crisis, with 2019 debt to GDP (GDP) ratio of 155%, the third most indebted country in the world after Japan and Greece. The Lebanese pound lost more than 80% of its value against the dollar in the black market between October and July, and its unemployment rate was over 30% at the end of May.

– of CNBC Emma Graham And Natasha Turk Contributed to this report.