Opinion

We have no desire to impose capital controls, Lebanon’s central bank governor says

Bankers and analysts have cited wide fears depositors will try to take out their savings when banks reopened as a precaution against ongoing anti-government protests. (Reuters)
Updated 12 November 2019

We have no desire to impose capital controls, Lebanon’s central bank governor says

  • The country’s bank employees are on strike after being attacked by depositors

BEIRUT: A demonstration outside the central bank of Lebanon to protest financial measures adopted by the Banque du Liban (BDL) prompted the central bank’s governor, Riad Salameh, to hold a press conference on Monday.

The demonstration, part of the protests in Lebanon over the past 26 days, drew hundreds of people.

The press conference was to address the confusion that has followed restrictions being imposed on dollar withdrawals and transfers with the presence of two exchange rates; an official one not exceeding 1,515 liras and another one in exchange shops, which reached 2,000 liras two days ago.

Salameh said that BDL’s main objective was “to preserve the stability of the Lebanese lira peg.” He said that “the protection of depositors and deposits is a fundamental and ultimate matter.”

“We have taken the necessary measures so as to avoid losses to the depositors,” he said. “There will be no haircut as rumored because BDL cannot do this and the deposits belong to the Lebanese people.”

Salameh said: “We have asked the banks to meet the needs of the Lebanese inside the country and abroad. We have also asked the banks to reassess all credit facilities they had cut since Oct. 17 (the start of the protests). They shall review them to study them based on their situation in order to meet the returned cheques resulting from the reduction of these facilities.”

He said that the central bank was allowing banks to borrow dollars at an interest rate of 20 percent to secure their needs of liquidity in dollars, provided this money is not transferred abroad. “We have also asked the banks to cover the installments of citizens’ loans in lira,” he said.

Salameh said that “BDL cannot interfere with the banknotes at exchange shops but has taken measures to secure dollar funds for wheat, food, fuel and medicine.” He said that banks have been urged to keep credit cards within their limits and provide liquidity for this.

“The central bank will try in the coming period to reduce interest rates to preserve the banking sector and the solvency of the economy and sectors. The BDL has capabilities, including currency liquidity and investments, such as treasury bonds, which financed the public sector and the economy.”

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Salameh denied that “all bank money is in the possession of the BDL as rumored,” highlighting that “these banks have funds invested abroad, with the state, or in the private sector.”

He said that “the BDL does not have the power to impose capital controls and has no desire to do so.”

Salameh said that “the decline in economic activity and the negative growth in 2019 increased unemployment and affected many of the Lebanese people.”

“We noticed this situation through the defaulting on the repayment of housing loans,” he said.

“Between July and September, the assets of the central bank increased by 2 million dollars, but on Sept. 1, we had a setback when OFAC (the Office of Foreign Assets Control) sanctioned Lebanese banks and large amounts of cash were withdrawn from the BDL in lira. During September, October and November, we withdrew an amount in liras that is equal to what was withdrawn in the past three years, and this affected the dollars money market, raising the exchange rates at exchange shops.”

Salameh referred to the phenomenon of the Lebanese saving $3 billion in their homes: “We have an exceptional situation today. Lebanon has a free market economy, and we believe it should remain so. There is also freedom to trade goods and cash.”

“The reserve in the BDL — not including gold — is $38 billion, including eurobonds and the central bank’s investments, and the current monetary capacity is about $30 billion.”

Salameh said that the financial architecture in 2016 allowed for the creation of large reserves that supported the lira and helped
to implement international banking standards. 

“We did not use public money in our financial engineering, and calling for financial re-engineering is inaccurate.”

He said that “the central bank financed and did not spend, and that those who spent were the ones who developed and monitored the state’s budget.” He said that he is implementing the policy that serves the interest of Lebanon and the Lebanese people and that the BDL is trying to protect Lebanon during the current difficult situation in the region.

Salameh said that the exceptional circumstances do not allow for the establishment of a financial architecture but the management of the existing liquidity to protect the credit situation in the country.

Salameh’s press conference coincided with the Lebanese Bank Employee Union’s calling of a strike starting on Tuesday and “until the general situation stabilizes.” Salameh commented on the move by saying that he was not aware of the open strike. “The measures we have agreed on with the banks must be implemented and a solution must be reached for the strikes,” he said.

The bank union said in a statement that the reason for the strike was that the banking sector saw in the last week unstable conditions that led to unacceptable working conditions, highlighting that bank employees have been insulted and even attacked by depositors despite their concerns being understood.

The bank said that there was also chaos in a number of bank branches, which led to confusion, concern and fear among bank employees who continued to perform their professional duties despite these psychologically and physically stressful conditions.

Banks in Lebanon closed on Saturday and Monday because of the Muslim holiday, the Prophet’s Mawlid.


Thousands protest in Iraq to demand ouster of US troops

Updated 24 January 2020

Thousands protest in Iraq to demand ouster of US troops

  • A representative of Sadr took to the stage at the protest site and read out a statement by the influential Shiite cleric and populist politician
  • In the early hours of Friday, thousands of men, women and children of all ages massed under grey skies in the Jadiriyah district of east Baghdad

BAGHDAD: Thousands of supporters of populist Iraqi cleric Moqtada Sadr gathered in Baghdad on Friday for a rally to demand the ouster of US troops, putting the protest-hit capital on edge.

The march rattled the separate, months-old protest movement that has gripped the capital and the Shiite-majority south since October, demanding a government overhaul, early elections and more accountability.

In the early hours of Friday, thousands of men, women and children of all ages massed under grey skies in the Jadiriyah district of east Baghdad.

“Get out, get out, occupier!” some shouted, while others chanted, “Yes to sovereignty!“

A representative of Sadr took to the stage at the protest site and read out a statement by the influential Shiite cleric and populist politician.

It called for all foreign forces to leave Iraq, the cancelation of Iraq’s security agreements with the US, the closure of Iraqi airspace to American military and surveillance aircraft and for US President Donald Trump not to be “arrogant” when addressing Iraqi officials.

“If all this is implemented, we will deal with it as a non-occupying country — otherwise it will be considered a country hostile to Iraq,” the statement said.

Protesters then began peeling away from the square, tossing their signs in bins along the way, but thousands lingered in the rally camp.

The American military presence has been a hot-button issue in Iraq since a US drone strike killed Iranian general Qasem Soleimani and Iraqi paramilitary leader Abu
Mahdi Al-Muhandis outside Baghdad airport on January 3.

Two days later, parliament voted for all foreign troops, including some 5,200 US personnel, to leave the country.

The vote was non-binding and the US special envoy for the coalition against the Daesh group, James Jeffrey, said Thursday there was no “real engagement” between the two governments on the issue.

Joint US-Iraqi operations against IS have been on hold since the drone attack, which triggered retaliatory Iranian missile strikes against US troops in Iraq.

No Iraqi or US personnel were killed in Iran’s strike.

Long opposed to the US troop presence, Sadr seized on the public anger over the drone strike to call “a million-strong, peaceful, unified demonstration to condemn the American presence and its violations.”

Several pro-Iran factions from the Hashed Al-Shaabi paramilitary force, usually rivals of Sadr, backed his call and pledged to join.

But separate anti-government protesters, who have braved violence that has left 470 people dead since October, fear their cause could be eclipsed by Sadr’s powerplay.

“Sadr doesn’t represent us,” one teenager said defiantly late Thursday on a blocked-off thoroughfare in Baghdad.

To head off Friday’s gathering and ramp up pressure on authorities to enact reforms, young demonstrators blocked streets in Baghdad and across the south this week.

There had been worries that angry crowds might attack the presidential palace or the high-security Green Zone, home to the US embassy and other foreign missions.

The move would not be without precedent for Sadr, who urged followers to storm the Green Zone in 2016 in a challenge to the government over undelivered reforms.

But there were no attempts on Friday morning to storm government buildings.

Sadr, 46, battled US forces at the head of his Mehdi Army militia after the US-led invasion toppled Saddam Hussein in 2003.

He later branded himself a reformist and backed the recent anti-government protests when they erupted in October.

The cleric controls parliament’s largest bloc and his followers hold top ministerial positions.

Sadr is a notoriously fickle politician, known for switching alliances quickly.

His spokesman Saleh Al-Obeidy hinted that while others in Iraq unequivocally blamed either the US or Iran for instability, Sadr would choose a middle path.

“We believe that both are behind this ruin, and Sadr is trying to balance between the two,” he said.

Harith Hasan of the Carnegie Middle East Center said Sadr was trying to sustain his “multiple identities” by backing various protests.

“On the one hand, (he seeks to) position himself as the leader of a reform movement, as a populist, as anti-establishment,” Hasan told AFP.

“On the other hand, he also wants to sustain his image as the leader of the resistance to the ‘American occupation’,” partly to win favor with Iran.
Sadr may also have domestic motivations, Hasan said.

“This protest will show Sadr is still the one able to mobilize large groups of people in the streets — but it’s also possible he wants other groups to respond by giving him more space to choose the prime minister.”