NO HAIRCUT! NO CAPITAL CONTROLS
LOWER INTEREST RATES

Central Bank pledges support to the official exchange rate

The Central Bank (BDL) reiterated its support to the official exchange rate. It announced that there will not be a forced decrease in deposits (a.k.a Haircut). It also pledged that there will be no interdiction of fund transfer to outside the country (Capital Control). It also said that it expects that interest rates will decrease.

Governor of the Central Bank Riad Salameh said that BDL cannot and will not interfere with foreign exchange counters to mitigate higher exchange rates at foreign currency counters. He said that the parallel exchange rates at these counters will return closer to the official rate once the current extraordinary circumstances subside.

Salameh said that several billion dollars have been withdrawn from banks in the past few months, most of which is being hoarded at homes. “We estimate that only $700 million of these withdrawals have been transferred outside the country,” he said

BDL's gross foreign currency reserves amount to $38 billion including Eurobonds and other investments but excluding gold. Nearly $30 billion of these reserves are in available cash that can be used in the markets.

BDL has opened the door for banks to borrow US dollars from it at a rate of 20 percent to fulfill customer demand for the green currency, provided the funds are not transferred outside the country.

BDL has also asked banks to reverse impediments they implemented recently. The required measures include restoring credit limits on commercial loans and credit cards, providing hard currencies for external trade and personal transfers for necessities, honoring checks that have bounced due to the lowering of credit facilities, and allowing payments in lira of mortgages and other personal loans originally denominated in USD.

The Association of Banks (ABL) said it hopes Salameh’s statement would have a positive impact on the banks’ activities especially that he has asserted BDL’s commitment to maintain monetary stability and the exchange value of the lira, as well as protecting customers’ deposits. The ABL said: “The association commends the Governor’s reassurances regarding the intention not to use Capital Control or Haircut measures.” It said that it welcomes Salameh’s directives that transfers abroad must be done only to serve the basic needs of citizens.

“There is a consensus among BDL, the banks, the government, and politicians that the measures to be taken to face the crisis must not include any haircuts or capital controls,” said Amine Awad, General Manager at BLOM Bank. He said: “The banks have noticed high demand for transfers and there should be more discipline in processing transfers and withdrawals for customers.” “Priority in providing liquidity must be given to the more urgent needs of consumers and businesses,” Awad said.

Reported by Ramzi El Hafez and Shikrallah Nakhoul