Officials, experts blame Lebanese central bank governor for country's dollar crisis

Source: Xinhua| 2020-01-15 20:30:43|Editor: xuxin
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by Dana Halawi

BEIRUT, Jan. 15 (Xinhua) -- Some Lebanese officials and experts blame Central Bank Governor Riad Salameh for the drop in the exchange rate of the Lebanese pound against the U.S. dollar after having adopted a fixed exchange rate for the past 30 years.

For the past few months, Lebanese banks imposed restrictions on people's withdrawal in U.S. currency, creating fear among depositors about their dollar accounts and prompting them to increase their demand for dollar, which led to a further weakening of the Lebanese pound.

Since banks failed to cater to the demand of depositors for U.S. dollar, people started withdrawing Lebanese pounds and exchanging them at money exchange companies which created a parallel market with one U.S. dollar sold at 2,500 Lebanese pounds.

Former Interior Minister Marwan Charbel accused Salameh of conspiring with exchange companies by allowing them to increase the price of the U.S. dollar to generate revenues for exchange companies and banks at the same time.

Charbel explained that people can ask their banks to withdraw their U.S. dollar deposits by checks and then exchange these checks from money exchange companies at a lower value which create a profit for exchange companies.

"Then, exchange companies share this profit with banks," he said.

Charbel urged Salameh to intervene and stop these practices in a bid to restore people's confidence in the banking sector.

He said Salameh is legally allowed to stop such practices.

Elias Hankash, parliament member, accused Salameh of conspiring with exchange companies because he did not use his legal power to stop money exchange companies who sell the U.S. dollar at a higher price.

Hankash also assured that money exchange companies are getting their U.S. dollar from banks which means that banks have liquidity in U.S. currency but they are depriving people from their deposits.

Layal Mansour, economist and lecturer at the Lebanese American University, blames Salameh for not being transparent and turning a blind eye to U.S. dollar withdrawals by big depositors while preventing small depositors from using their dollars properly.

Mansour told Xinhua that less than 1 percent of the Lebanese own 50 percent of deposits in Lebanon with accounts worth millions of dollars while the other 50 percent of deposits are owned by small depositors.

Mansour added that even if half of the population with small bank accounts went to banks to withdraw their deposits, Lebanon would certainly not have reached this level of deterioration.

Meanwhile, Nassib Ghobril, economist and head of the economic research department at Byblos Bank, attributed the shortage in U.S. dollar to lower liquidity in Lebanese banks caused by the withdrawal of 10 billion U.S. dollars in September, October and November 2019.

Ghobril told Xinhua that there was a bank run by Lebanese people caused by the loss of confidence in the banking sector following Fitch downgrade of Lebanon's rating and the uncertain security situation after the Israeli drones' crash in Beirut's southern suburbs followed by the U.S. sanctions imposed against Jammal Trust Bank in September last year.

Ghobril noted that banks closed for around 12 days in October 2019 after the beginning of nationwide protests because of security reasons which prompted people to run to banks after they re-opened in the first week of November last year to withdraw their deposits or transfer them outside the country.

"People withdrew big amounts of money because they feared that banks would shut down again while banks were not prepared for this scenario," He said.

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