Panic buying grips Lebanon as state subsidy funds run low

Head of the central bank says funds will run out in two months

People walk at a souk, as the Lebanese government ordered a national lockdown, to combat a resurgence of the coronavirus disease (COVID-19) outbreak, in Sidon, Lebanon November 16, 2020. Picture taken November 16, 2020. REUTERS/Aziz Taher

Lebanon's central bank can keep basic subsidies for only two more months and the state should come up with a plan, governor Riad Salameh said on Tuesday.

As the country's financial crisis worsened, he told Al Hadath TV of Saudi Arabia that the bank would commit to providing Lebanese government accounts for a forensic audit, but that disclosing those of domestic banks would require a change in legislation.

An economic collapse this year crashed Lebanon's currency, paralysed banks and sent inflation soaring.

As the flow of dollars dried up, the central bank used dwindling reserves to provide foreign currency for key imports such as fuel, wheat and medicine, as well as some basic goods.

Suggestions of a looming end to subsidies caused panic buying and fears of hunger. The financial crisis has made more than half of the population poor.

"We have the capacity to keep the subsidies for two months," Mr Salameh said.

Hhe said "those in charge of the country" should also be asked about the subsidies.

He said politicians would meet this week to start drafting a plan.

Foreign donors called for a forensic audit of the central bank and other reforms to be introduced before they would help Lebanon out of a crisis rooted in decades of waste and corruption.

But restructuring consultancy Alvarez & Marsal said it withdrew from the audit because it did not receive the information required.

Some Lebanese officials accused Mr Salameh of using bank secrecy laws to justify withholding information.

Mr Salameh said he supported an audit but accounts at local banks could not be revealed without some laws being amended.

The central bank would seek to reorganise and sell Lebanese banks that fail to raise capital, he said.

He said those that could not increase their capital by 20 per cent by the end of February 2021 will have to leave the market.

In response to a question about the possibility of US sanctions, Mr Salameh said the bank was doing everything necessary within the law and "in constant co-ordination with the US Treasury".

Washington recent months imposed sanctions on Lebanese officials owing to charges of corruption or enabling Iran-backed group Hezbollah.

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