During an interview with Radio Free Lebanon on Saturday morning, Lebanese Central Bank Governor Riad Salameh discussed the latest developments in Lebanon and talked about his place in the current situation.
Here is what he had to say about the fuel subsidy, the economic situation, Hezbollah, and the allegations he is facing.
Fuel & Subsidies
Salameh blamed local traders for the shortage of fuel being witnessed across Lebanon. He said that traders were responsible for exchanging goods “unreasonably.”
“It’s unacceptable that we import 820 million dollars for fuel and not see diesel fuel, gasoline, or electricity. This is humiliation in itself against the Lebanese, not the positions adopted by us.”
The Banque du Liban (BDL) had been expecting the aforementioned sum to cover Lebanon’s fuel needs for three months rather than a single month, Salameh said.
In regards to ending the fuel subsidy, he stressed that the government was aware of the decision, “starting from the Presidency of the Republic and Parliament, as well as the members of the Central Council.” He denied having taken the decision individually.
“I will not retract the lifting of the subsidy on fuel unless the use of the mandatory reserve is legislated,” he said, noting that if the use of the BDL’s mandatory reserve or mandatory assets crosses the red line, “we will be violating the law.”
He continued: “Today, the bank is obliged to stop financing these credits and provide an alternative.”
Salameh then addressed Lebanese officials, saying: “Go ahead and go to Parliament and let us burn all these dollars and get fuel.”
Elaborating on the decision to end the subsidy, he said: “The Central Council has decided to allocate funds to finance the import of medicines, especially for incurable and chronic illnesses, and flour and diesel fuel for bakeries and hospitals, meaning that it’s not a decision taken with so much brutality.”
The remainder of the BDL’s reserve currently stands at $14 billion, added to $20 billion in foreign assets, Salameh revealed, explaining that the BDL has no relation to the fuel and energy platform nor to energy regulation in Lebanon.
He noted that the Central Bank would have no problem using its reserve of foreign currency to finance the cash card plan that is being developed by the government.
The Crisis & the Economy
In Salameh‘s view, the negative view of Lebanon started after the approval of the series of ranks and salaries and the detention of former PM Saad Hariri in Saudi Arabia.
“Our problem is that we believed that there would be reforms.”
He also directed some blame for the crisis to refugees, whom he said cost Lebanon $30 billion.
The crisis ends when an agreement is reached on the distribution of losses, with the sparing of depositors, and when a government is formed to address problems as soon as possible, he said.
“The distribution of losses that occurred was unfair to the Central Bank because the effect of assigning all losses to the [Central Bank] means that they are transferred to the banking sector, which leads to the bankruptcy of some banks and the loss of depositors’ money.”
“Therefore, the main principle of the solution was to not harm the depositors’ money.”
Salameh stressed that there has to be a government that would be ready to negotiate with the International Monetary Fund, saying that he has no problem with forensic auditing.
He went on to urge the state to recognize its debts. He also emphasized that “all is not lost for depositors” and underlined the necessity of correcting wages.
“If the correction of wages is done, we will overcome the crisis with the least possible damage.”
“Al-Qard Al-Hassan is an unlicensed association in the Central Bank, and when a company does banking business while unlicensed, it is prosecuted by the judiciary and the Interior Ministry,” Salameh said about Hezbollah’s financial arm.
“There is nothing against Hezbollah, but historically, we have taken decisions that were considered harmful to the party’s interests, and they accepted them, starting with the sanctions and until today,” he added.
Banking and Finance
The Central Bank Governor said that banks that can ensure continuity will remain, “but for Lebanon to return to normal, we need time, new confidence, and energy.”
Deposits will be gradually withdrawn, and options other than the withdrawal of funds at the 3,900 LBP/USD exchange rate might be introduced, Salameh explained, noting that things can change in the world of finance and that $30 billion of deposits in Lebanon have been withdrawn.
He said that depositors are receiving their funds below their values, “but that’s their choice, they are deciding to [receive a haircut].” He urged depositors to wait for the formation of the government, affirming that deposits “will be recomposed” afterward.
As for the Lebanese pound, it is “hostage to the formation of the government and the implementation of reforms,” according to Salameh.
Had the Lebanese pound not been pegged to the U.S. dollar in previous years, it would have traded at 1,200 pounds against the dollar, not 1,500, Salameh said.
“I appeared before the judiciary as a suspect, and I’m not a beneficiary of the Central Bank,” Salameh said about the financial misconduct allegations surrounding him.
“The operations that were reported outside Lebanon are not funded by the Central Bank, the lawsuits filed against me from the same authorities, and the media portrayed me as having been sentenced.”
“Someone wants Riad Salameh‘s head as a scapegoat, someone is working these schemes,” he continued.
Salameh said that his assistant, Marianne Hoayek, is paying the price because she’s close to him, “and she will remain close to me.”
Politics and the FPM
On the relationship with the U.S. Treasury, Salameh emphasized that the matter is “not a balance of terror.”
“We are keen on our relationship with the U.S. Treasury for the benefit of Lebanon, and our success in this is because of our transparent dealings.”
“Internally I have no enemies, meaning that the secrets of the system and the parties are not in the Central Bank but in the banks, and I’m not protected by anyone,” he said.
The official took a jab at the FPM president, saying: “I am the governor of the Central Bank, but the president of the Free Patriotic Movement, Gebran Bassil, is the governor of the country.”