Lebanon central bank chief rules out printing money to cover fiscal deficit

Wassim Mansour took on the role after long-time bank governor Riad Salameh stepped down last month

Lebanon will not bridge its mammoth fiscal deficit by printing more of the embattled local currency, the country's central bank has said.

Wassim Mansouri, the acting central bank governor, said there was urgent need for deep reforms and co-operation from the parliament and government.

"The central bank will not cover the deficit by lending to the government, neither in dollars nor in Lebanese pounds," he said.

"Lebanese currency will not be printed to cover the deficit."

The draft budget for 2023 – which was approved by the government only last week nearly nine months into the year – included a state deficit of 24 per cent, or 46 trillion Lebanese pounds, the acting governor said. That would amount to slightly more than $500 million on the parallel market.

Mr Mansouri took on the role after scandal-hit Riad Salameh ended his three-decade tenure as the head of the central bank last month.

Mr Salameh is facing corruption allegations in Lebanon and abroad. He rejects the charges levelled against him.

Lebanon is struggling with one of the worst economic crises in modern history, in which the local currency lost about 98 per cent of its value against the US dollar on the parallel market.

The acting bank chief also said on Friday that public sector salaries, the value of which have plummeted during the crisis, would be paid in dollars for August at a rate of one dollar to 85,500 Lebanese pounds.

On Friday the dollar was trading at about 89,600 Lebanese pounds according to websites that track the parallel market.

In his call for the adoption of economic reforms, Mr Mansouri said that every day that goes by without change increases the risk of the state collapsing and only adds to the financial losses.

"Delaying reforms risks isolating the country from the global financial system," he said

He warned that the central bank could not maintain monetary stability without co-operation from the government and parliament.

Lebanon reached a staff level agreement with the International Monetary Fund for a $3 billion bailout last spring, but has failed to implement most of the requirements stipulated to secure the funding.