Lebanon's Central Bank Governor Defends His Role amid Crisis

Lebanon’s central bank governor defended himself Wednesday against scathing criticism by the government, claiming there is a “systematic campaign” meant to hold him responsible for the country’s recent financial crisis and the collapse of the national currency.

Speaking in an hour-long video conference, Gov. Riad Salameh, who has held the post since 1993, deflected blame and said he did what he had to do to maintain Lebanon's monetary stability in the face of various crises over the past years. He blamed politicians for reneging on repeated promises of reform.

The speech came after a day of violence, when hundreds of protesters in the northern city of Tripoli clashed with troops until late Tuesday night. The violence left several injured on both sides in some of the most serious rioting triggered by the economic crisis spiraling out of control amid a weeks-long virus lockdown.

Salameh was responding to accusations made by Lebanese Prime Minister Hassan Diab last week in which he held the governor responsible for the downward spiral and accused him of pursuing “opaque” policies that sent the pound crashing against the dollar.

Diab urged Salameh to speak openly to the public about the financial crisis, hinting that the governor has intentionally engineered the crash of the pound.
Salameh rejected the accusations, saying Wednesday there was nothing hidden and that he had previously handed over requested information to the prime minister. He said that while it was true that the central bank has financed the government, it is the government that spent the funds and owes the bank billions of dollars.

"To say otherwise is defamation that aims to mislead public opinion and make it believe that the governor is solely responsible for the monetary policy in order to reinforce the systematic campaign targeting him personally,” he said.
The central bank had as of last week $20.8 billion in reserves, Salameh said, and reassured the Lebanese that their bank deposits were safe. He said he is against taking a cut from depositors’ accounts to cover bank debt, saying such a policy currently debated among experts would scare depositors and turn any future ones away. Other politicians have also rejected the suggestion of a “hair cut.”
The Lebanese pound has been on a downward trajectory for weeks amid a worsening liquidity crunch and an economic slump. But it appeared to be in a free fall over the last few days, selling as low as 4,000 pounds to the dollar, down from a fixed peg of 1,500 pounds to the dollar in place for 30 years.

Salameh defended his management of the liquidity crunch, saying he has taken several steps to regulate the currency’s downward spiral, ensure imports of basic goods continue and increase capitalization of private banks to protect depositors’ accounts.

Banks have imposed effective capital controls and the central bank has recently required banks to give depositors of foreign currency accounts their money in local currency. The measures have created multiple exchange rates in the black market and were seen by experts as an attempt to reduce the banks’ liabilities, increasing pressure on the dollar.

The tiny Mediterranean country of about 5 million people is one the most indebted in the world. Nationwide protests broke out in October against the government because of widespread corruption and mismanagement of resources.

Diab’s government came to office in January and was quickly engulfed in a nationwide health crisis over the novel coronavirus, a crisis that deepened the country’s economic recession. The Lebanese authorities have reported more than 700 cases and at least 24 deaths from the pandemic.