The Bank of Lebanon sent a letter to the outgoing Minister of Finance Ghazi Wazni calling on the Lebanese authorities to adopt “a clear vision of the subsidy policy he wants to adopt, which shows the end of waste and within limits and controls that allow the preservation of the assets of the Bank of Lebanon in foreign currencies and work to contribute to the securing of imports in hard currencies “
The central bank thus indicates that it will no longer be able to continue financing the subsidy program for basic necessities, as it had done until now due to the exhaustion of available monetary reserves.
Riad Salamé also recalls that the president of the Bar of Lawyers, Melhem Khalaf threatens the central bank to initiate legal proceedings in the event of the use of mandatory monetary reserves for the continuation of the subsidy program.
According to Riad Salamé, the subsidy program would have made it possible to limit inflation to 84% in 2020 against a forecast of 275% if the program had not been put in place.
As of April 1, Riad Salamé reportedly informed the outgoing government that he would have only $ 1.5 billion available for this program, composed of $ 1 billion in cash and the equivalent of $ 650 million in Eurobonds and were previously valued at $ 5.5 billion.
As a reminder, the cost of the subsidy program was 700 million dollars during the period preceding the current crisis. It has fallen to $ 500 million currently, or $ 6 billion per year, of which $ 3 billion is for fuels alone. Questions also relate to the reality of the 16 billion dollars of gross reserves of the Bank of Lebanon mainly constituted by the sums available by the 15% of minimum reserves on bank deposits.
The establishment of a prepaid card program would however depend on the approval by the parliament since it would then be an annual loan for an amount of one billion dollars from the Bank of Lebanon against 6 currently. . This program would be aimed at 800,000 families now.
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