Lebanon premier touts default, vows currency intervention

Bloomberg/ Beirut

Thursday، 21 May 2020 11:43 PM

Lebanese Prime Minister Hassan Diab blamed “criminal” currency manipulation for the unraveling of the country’s decades-old peg as he touted his cabinet’s achievements despite an unprecedented financial crisis.
Flanked by his entire cabinet during a televised speech yesterday, Diab criticised what he said were years of neglect and mismanagement on the part of the state, saying his own government – in place since January – was on the path to restoring confidence in Lebanon.
The monetary authority will intervene in the local foreign-exchange market to stabilise the pound, he said.
“The central bank governor has made a vow to intervene in the exchange market starting today to protect the Lebanese pound and stem the rise in the price of the dollar,” Diab said in a televised speech on Thursday.
Lebanon has plunged into a full-blown financial crisis since October, when nationwide protests erupted against worsening living conditions and brought down the government of Premier Saad Hariri. The government and its banks were already suffering from a shortage of dollars, leading to a crash of the local currency that’s lost nearly 60% of its value.
Diab stood by the decision to default on a $1.2bn Eurobond in March, saying it saved whatever was left in the country’s coffers to manage the spread of the coronavirus.
The central bank is already supporting the import of essential goods like wheat and medicine. Diab said it would also assist the import of food to help contain the sharp rise of prices. Lebanon heavily relies on shipments from abroad for almost all of its needs, from raw materials to foodstuffs.
Less than an hour after the premier’s speech, the central bank issued a statement, saying it would take measures to protect the pound and support the import of essential food items.
Lebanon’s financial prosecutor has arrested dozens of people, including a central bank director, for manipulating the currency and selling dollars to money changers. The director is accused of selectively selling dollars to exchange bureau managers, who in turn hoarded the foreign currency to push the price up even further.
The premier said he understood very well the suffering of the Lebanese people as a result of the currency crisis and vowed that they will soon see a drop in food prices. Diab also said that his government will cut spending by an additional 4% to 5% this year after asking ministries to reduce their own expenditure by up to  20%.

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