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Lebanon currency dollar peg ‘finished’: central bank governor

January 11, 2021 at 12:20 pm

People gather at a shop that provides money transfer services in the Lebanese capital Beirut on 9 November 2019. [ANWAR AMRO/AFP via Getty Images]

Lebanon’s central bank governor said the dollar peg is “finished” in an interview with France24 last week.

Riad Salameh, 70, who has headed Lebanon’s central bank since 1993, told the French channel: “The peg is finished.”

Salameh later clarified his comments, telling Reuters his remarks were taken “out of context” and that the Lebanese Lira, also known as the pound, would only be floated once a deal was agreed with the International Monetary Fund (IMF).

Officially, Lebanon’s currency is pegged to the US dollar at a rate of 1,507.5. The lira has been pegged at this rate since 1997.

However, since October 2019 the currency has lost more than 80 per cent of its value as a result of successive crises which started with the outbreak of mass anti-government protests.

In the last 12 months, informal exchange shops across the country have traded at rates over 8,000 lira to the US dollar, and many observers already consider the outdated peg null and void.

In July, Lebanese banks started using different rates dependent on the transaction.

The central bank started providing foreign currency at a fixed exchange rate of 3,900 lira to the dollar for essential food items, but account holders continued to withdraw at the 1,507 rate.

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Lebanon has been appealing for a bailout deal with the IMF since May last year, but negotiations have failed to yield an agreement.

Talks were put on hold in July due to the lack of action on reforms and a row on the Lebanese side over the size of the country’s vast financial losses.

Salameh denied any responsibility for bringing Lebanon to the brink of economic collapse, telling the France24 reporter, “my conscience is clear”.

The 70-year-old also denied he created the financial engineering program, which has been likened to a Ponzi scheme, widely credited with causing many of Lebanon’s financial woes.

Salameh told the French outlet he has no plans to resign from the central bank, despite Lebanon’s financial difficulties, and claimed he was the victim of a targeted campaign to scapegoat him for the crisis.

The central bank governor also denied claims made by the Organised Crime and Corruption Reporting Project (OCCRP) in August that he and his family used shell companies to manage real estate abroad.

The report claimed Salameh owned $100 million in overseas assets through companies only loosely linked to the governor and his family.

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