Lebanon's central bank needs major reforms to maintain financial stability: official

Source: Xinhua| 2019-05-14 18:22:07|Editor: xuxin
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BEIRUT, May 14 (Xinhua) -- Lebanon's Central Bank Governor Riad Salameh said that the country should take major reforms to help the central bank to preserve financial stability, local newspaper Asharq al-Awsat reported on Tuesday.

"The government must help the central bank by adopting a strategy that would create growth. The biggest problem in Lebanon is the absence of a broad economic strategy," Salameh told the newspaper.

The governor urged the government to take measures that would bolster the economy which is reeling under 85 billion U.S. dollars in public debt.

"The government's continuous borrowing from banks will not lead to an increase in growth in the country," he said.

In the past 30 years, Lebanon has serviced its debt with implicit support from international donors and a creditor base dominated by domestic commercial banks and the central bank in addition to a diaspora.

Salameh said that it is impossible for the central bank to finance the government at a non-market rate of 1 percent for 10 years to cover part of its budget deficit.

"This would negatively impact our rating," he said.

Lebanese government has been calling for more support from banks by subscribing to Treasury Bills in a bid to reduce the cost of debt servicing which could reach 58.6 percent of the government's revenues by 2021 if the fiscal deficit maintained the same momentum, according to Moody's Investors Service.