In a statement, the Banque du Liban said it was asking the government to adopt a new law authorizing it to grant foreign currency loans to the state to finance part of the subsidies.
It therefore considers that Law 91 of the Currency and Credit Code allows the Banque du Liban to grant State loans on its foreign exchange reserves, “on condition that the State repays this loan”.
However, this press release raises a certain number of questions concerning the previous practices of the Banque du Liban and in particular its taps on its monetary reserves which are in reality the deposits of the customers of private banks.
Thus, these reserves have financed for years the subsidy program for the purchase of basic necessities due to the overvaluation of the local currency, underline some observers who point out that nearly 3 billion dollars were also paid to the place of the Ministry of Finance in 2019 to finance the payment of foreign currency bonds of the Banque du Liban before the default in 2020.
The Banque du Liban would thus hold 16% of the Lebanese government’s Eurobonds, its reports indicated, and 61% of the debt in local bonds, denominated in Lebanese pounds. According to observers, the role of the Banque du Liban could thus be called into question if it demands the adoption of such legislation, whereas a few months ago, its governor, Riad Salamé, stressed that the role of a central bank was mainly to lend money to public authorities on the basis of Article 91 of the Law on Money and Credit, without having obliged the state to repay it until now.
According to the statement, the aim would be to put in place a clear plan for rationing subsidies and to lay the foundations for a resumption of economic growth. Thus, “in foreign currency under section 91, the government must adopt the appropriate legal framework which allows the Central Bank to use its available liquidity, but on condition that this loan is paid in full plus interest within a certain period “, the published text always indicated.