Lebanon’s central Bank declares era of dollar peg over

Lebanon’s central bank governor Riad Salameh said on Friday the era of the dollar peg was finished but said any floatation of the currency would depend on negotiations with the International Monetary Fund.
Saturday 09/01/2021
A Lebanese customer counts US dollar banknotes next to Lebanese pounds at a currency exchange shop in Beirut, Lebanon December 7, 2020. (REUTERS)
A Lebanese customer counts US dollar banknotes next to Lebanese pounds at a currency exchange shop in Beirut, Lebanon December 7, 2020. (REUTERS)

BEIRUT--Lebanon’s central bank governor Riad Salameh said on Friday the era of the dollar peg was finished but said any floatation of the currency would depend on negotiations with the International Monetary Fund.

Salameh made his comments in an interview with France24.

When asked in the interview whether the era of the dollar peg was finished, Salameh replied: “The peg is finished.”

Asked whether this meant the currency would now be floated, Salameh said his comments were circulated “out of context”.

“I said depending on the IMF, precision is important,” he explained.

Lebanon’s worst crisis since its 1975-1990 civil war has crashed the currency and sent inflation soaring. A looming end to subsidies has triggered UN warnings of “social catastrophe.”

In the interview with France 24’s Marc Perelman, Salameh also denied any responsibility for the financial crisis.

“My conscience is clear,” he said, strongly hinting that he had been made a scapegoat.

Salameh denied being at the origin of a “Ponzi scheme”, as described by French President Emmanuel Macron, saying that the central bank has instead supported a Lebanese economy on the brink of collapse.

The central bank governor admitted that some wealthy Lebanese were able to withdraw large sums of money and send it abroad, at a time when his fellow citizens were only allowed to withdraw limited amounts.

In this regard, he said he had proposed capital controls at the start of the crisis, but that this was refused.

As dollar inflows have dried up in Lebanon, the central bank has drawn on critical foreign reserves to subsidise three key commodities – wheat, fuel and medicine – and some basic goods.

The import-dependent country has an estimated population of six million, including at least a million Syrian refugees.

Foreign donors have made clear they will not bail out the state unless it launches reforms to tackle decades of graft, a root cause of the crisis. Arab Gulf countries that once came to Lebanon’s rescue have also grown alarmed by Hezbollah’s expanding influence.