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Nobody's running Lebanon, central bank boss says

EconomyAug 14, 2021 01:10PM ET
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2/2 © Reuters. A general view of Beirut central district, Lebanon, August 22, 2019. REUTERS/Mohamed Azakir 2/2

By Laila Bassam and Nafisa Eltahir

BEIRUT (Reuters) -Lebanon's central bank governor said nobody was running the country, hitting back after government criticism of his decision to halt fuel subsidies that have drained currency reserves.

In an interview broadcast on Saturday, Riad Salameh said the government could resolve the problem quickly by passing necessary legislation.

The country's President Michel Aoun later on Saturday called on parliament to convene and take appropriate action on the crisis, his office said in a statement, without specifying a time or a particular proposal.

Salameh denied he had acted alone in declaring an end to the subsidies on Wednesday, and said it was widely known that the decision was coming.

"So far you have nobody running the country," Salameh told Radio Free Lebanon.

The worsening fuel crisis is part of Lebanon's wider financial meltdown. Hospitals, bakeries and many businesses are scaling back operations or shutting down as fuel runs dry.

Deadly violence has flared in fuel lines, protesters have blocked roads, and fuel tankers have been hijacked this week.

The American University of Beirut Medical Center said it was threatened with a forced shutdown as early as Monday because of shortages of fuel used to generate electricity.

"This means that ventilators and other lifesaving medical devices will cease to operate. Forty adult patients and 15 children living on respirators will die immediately," the hospital said.

The central bank's move to end subsidies will mean sharp price increases. It is the latest turn in a crisis that has sunk the Lebanese pound by 90% in less than two years and pushed more than half the population into poverty.

The central bank has effectively been subsidising fuel and other vital imports by providing dollars at exchange rates below the real price of the pound - most recently at 3,900 pounds to the dollar compared with parallel market rates above 20,000. This has eaten into a reserve which Salameh said now stood at $14 billion.

To continue providing such support, the central bank has said it needs legislation to allow use of the mandatory reserve, a portion of deposits that must be preserved by law.

"We are saying to everyone: You want to spend the mandatory reserve, we are ready, give us the law. It will take five minutes," Salameh said.

"HUMILIATION OF THE LEBANESE"

The government has said fuel prices must not change. Fuel importers say they cannot import at market rates and sell at subsidised rates, and want clarity.

The central bank and oil authority told importers to sell their stocks at the subsidised rate of 3,900 pounds to the dollar, prioritising hospitals and other essential functions.

Lebanon's army said on Saturday it had begun raiding closed petrol stations and distributing stored gasoline to citizens.

Critics of the subsidy scheme say it has encouraged smuggling and hoarding by selling commodities at a fraction of their real price.

Salameh said the bank had been obliged to finance traders who were not bringing their product to the market, and that more than $800 million spent on fuel imports in the last month should have lasted three months.

Salameh said there was no diesel, gasoline or electricity, adding: "This is humiliation of the Lebanese."

Lebanese politicians have failed to agree on a new government since Prime Minister Hassan Diab quit last August after a deadly explosion at Beirut port. He has stayed on as caretaker prime minister.

President Aoun expressed optimism a new government would be formed soon.

Salameh said Lebanon could exit its crisis if a reform-minded government took office, adding the pound was "hostage to the formation of a new government and reforms".

The government has said ending subsidies must wait until prepaid cash cards for the poor are rolled out. Parliament approved these in June, with financing from the mandatory reserve, Salameh said, but they have yet to materialise.

Nobody's running Lebanon, central bank boss says
 

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Comments (10)
ben sc
ben sc Aug 14, 2021 5:44PM ET
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Reuters with all time unintended Biden troll. lol, yeah, he worked two days last week and now is in for two week vacation. He's so tired from getting covid under control and lowering inflation and energy prices.
Greg Hamilton
OptionsTrader Aug 14, 2021 5:35PM ET
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Don't worry Lebanon, you should see who is running the U.S.A. 🤣
Haruna Shuaibu
Haruna Shuaibu Aug 14, 2021 5:11PM ET
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Everything needed time
Jokers R Us
Jokers R Us Aug 14, 2021 2:47PM ET
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We have devil worshipping communists running our government
Jimmy Kiapas
Jimmy Kiapas Aug 14, 2021 2:47PM ET
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Read and learn what Democracy truly means... it's short for Demonic...
michael engel
michael engel Aug 14, 2021 1:51PM ET
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Since Nixon DXY plunged to 2009 fractal zone.We lost ARAMCO to beef up NATO, but we won Egypt and Mao. We decay because our zombie state is in the denominator. We deflate and come back. Since Sept 11 2011 our singularity expanded to Afghanistan and Iraq. We made  new friends to surround Ira. France will help Lebanon when a leader will be found.
Darryl Allen
Darryl Allen Aug 14, 2021 1:33PM ET
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The central bank is running Lebanon. Same in every country.
Scott Patterson
Scott Patterson Aug 14, 2021 1:09PM ET
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Pay attention to economic collapse in Lebanon.  These conditions will be repeated in the United States, eventually, and some of them are already here.
New Jazenevd
New Jazenevd Aug 14, 2021 12:23PM ET
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A failed state, where “fighting Zionism” is the only allowed goal. Quite typical story, promoted by left wingers of all stripes.
michael engel
michael engel Aug 14, 2021 10:30AM ET
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A weaker Lebanon makes Nasrallah strong. The Afghan chaos is cooked in Pakistan. Iran benefit from both. US counter attacks will start soon, pushing the invincible Taliban back to the mountains. They are and too small too diverse to control Afghanistan. No Saigon.
Andrew Allen
Andrew Allen Aug 14, 2021 10:30AM ET
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Can't hold them back forever. Ever wonder why we trained them to wrap up the soviets in Afghanistan?
Vv Pp
Vv Pp Aug 14, 2021 10:30AM ET
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Andrew 👍👍
Kaveh Sun
Kaveh Sun Aug 14, 2021 10:30AM ET
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There is no counter attack since China Biden wont take any action.
Millennial Metals
Millennial Metals Aug 14, 2021 9:05AM ET
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Soon to be the USA
Show previous replies (3)
Andrew Allen
Andrew Allen Aug 14, 2021 9:05AM ET
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Atheists that believe religiously in the State are the problem in the US. I wish we had more hard working principled M*slims here
John Kochkerian
John Kochkerian Aug 14, 2021 9:05AM ET
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Then why do they Chinese and Indians flock here in droves?
Andrew Allen
Andrew Allen Aug 14, 2021 9:05AM ET
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Chinese and Indians flock here because where they come from they are very overcrowded and it is very difficult to make a living if you are poor. It's not as easy as it used to be to make a living here, but it's still better than Chinese Communist Party. Legal system isn't perfect either, but at least people pretend they care about human rights. Not so in China or India
Andrew Allen
Andrew Allen Aug 14, 2021 9:05AM ET
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and besides, an American college degree is the credential required by the current economic system all over the world that can get you a better job. School in China/India is extremely competitive, some State Schools here accept 95% of applicants
Scott Patterson
Scott Patterson Aug 14, 2021 9:05AM ET
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Andrew Allen  Absolute truth.  In California, high school graduation requirements have been reduced from 220 credits down to 130.  Students can fill out a form requesting their final grade be changed if they don’t agree with or the grade they received.  Commencement ceremonies have been replaced with “Senior Farewell” ceremonies, because every student is allowed to walk with their class on cap & gown, even if state graduation requirements were not met.
 
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