Lebanon needs up to $15bn to boost its economy, central bank governor says

Banque du Liban's mandatory dollar reserves have been slashed by more than half

Banque du Liban Governor Riad Salameh. Photo: AFP
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Lebanon needs to receive $12-$15 billion from its partners to kickstart its economic recovery and shore up fast-diminishing foreign currency reserves, Banque du Liban Governor Riad Salameh said on Tuesday.

Lebanon is grappling with an unprecedented economic crisis, which has been described by the World Bank as one of the worst in modern times.

More than 80 per cent of the population lives in poverty and the Lebanese pound has lost more than 90 per cent of its black market value amid political squabbling that has delayed an agreement with the International Monetary Fund.

"Our quota in the IMF is $4bn," Mr Salameh said in an interview.

"If countries add to it, we could reach $12bn to $15bn, an amount that could help start Lebanon's recovery and restore confidence."

Lebanon defaulted on its debt for the first time last year but political leaders have continued to resist crucial reforms demanded by donors to unlock necessary funds.

Meanwhile, the central bank's mandatory dollar reserves have been slashed by more than half.

"The mandatory reserves are down to $12.5bn," said Mr Salameh, whose finances have come under intense scrutiny since the collapse of Lebanon’s banking sector in 2019, which triggered the crash of the local currency and rapid inflation.

Mandatory reserves stood at $32bn before the start of the economic crisis.

The fast-diminishing reserves are threatening a subsidy programme that initially covered fuel, medicine, flour and other vital imports before it petered out.

The central bank can afford to finance partial subsidies on a few remaining imports for "around six to nine months", if no additional measures are taken to combat the depreciation of the Lebanese currency, Mr Salameh said.

Officially pegged at 1,507 pounds to the dollar since 1997, the Lebanese pound sold for nearly 30,000 to the dollar on the black market earlier this month in a record low.

The official fixed rate is "no longer realistic", Mr Salameh said, stating that a unified exchange rate would be unlikely in the absence of an IMF agreement and political stability.

Talks with the IMF that started last year have been relaunched in recent weeks. During these, Lebanese officials have agreed that financial sector losses amount to about $69bn.

"Lebanon is still in the stage of crushing numbers," Mr Salameh said. "The Lebanese side hasn't yet presented a plan to the IMF for discussion."

Updated: December 21, 2021, 11:26 AM