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Confusion and panic prevail among the Lebanese, caused by the “Shushra”, citing an informed official source, that the Governor of the Banque du Liban, Riad Salameh, is considering reducing the level of mandatory foreign exchange reserves to continue subsidizing the basic imports next year, from 15% to 12 or 10%. This is because there were only about $ 800 million left that could be used to support imports of fuel, wheat and medicines through the end of this year of around $ 17.9 billion, while the rest are mandatory reserves from the banks in the Central Bank.
The chief economist of the Byblos Bank Group, Nassib Ghobril, explains, on the website of the Lebanese Forces, that “this issue was only published in a news agency, and the Banque du Liban did not issue anything official. And in the event that this issue is discussed somewhere, perhaps only in the multiple meetings that are held on the subject of supports and that include officials, ministers and various stakeholders in economic and financial affairs, and as one of the ideas that have been raised without having a real father.
He points out, “Moving the legal reserve has monetary policy goals. Therefore, raising the reserve requirement ratio in any central bank in the world means withdrawing and reducing the liquidity of the markets, and one of the objectives is to curb inflation. Whereas in the case of reducing the ratio, this means pumping liquidity through the banks.
Ghobril states: “If the mandatory reserve ratio is reduced from 15% to 12 or 10%, then the sums released should go back to the banks, as it happens in any central bank in the world according to the monetary policy objectives of pumping or reduce liquidity ”, noting that“ we explained the theoretical and technical issue, because the Governor of the Banque du Liban denied the news and affirmed (it is unfounded, and that any reduction in the mandatory reserve ratios, if it occurs, will return to the owners of the deposits in the Banque du Liban who are the owners of the banks, and not for any other purpose).
He notes, “This is what often happens with respect to reserve ratios. As for the case that in the future there will be some agreement between the Banque du Liban and the banks to use the released funds, no one can speak about that day, as it was not discussed and the Banque du Liban did not issue anything official.
And he highlights, “The Banque du Liban is almost the only central bank in the world, which subsidizes the import of petroleum products, medicines, wheat, medical equipment, food basket and raw materials for industry and agriculture. Although in general in all the countries of the world the support is part of the budgets and the treasury ensures it, while in Lebanon the burden is entirely on the central bank that fills the void left by the executive power ”, considering that“ at Minus the responsibility and the cost should be shared between the two parties, keeping in mind that the responsibility should be That all are under executive authority, as in Egypt and others in many countries.
Ghobril states: “The executive authority cannot force the Banque du Liban to reduce the mandatory reserve ratio to use the funds released for support. What should happen is to change the support mechanism to support only needy and poor families, and there are many examples around the world and Arab countries of the methods adopted. Meanwhile, the support mechanism adopted today leads to support for importers, warehousing and smuggling.
The reserve pump, which seems safe so far, its circumstances were clarified by concerned financial sources, in an interview with the website “Forces”, stating that “with the beginning of the leak of news about the Central Bank reserves touching the red line and the possibility of starting to lift subsidies for basic materials, the claims began to intensify from the different political parties and organizations, the General Union of Workers, social institutions and popular sectors accepted the need not to increase the subsidies, because living conditions and increasing poverty heralded social disasters if this occurred.
However, the same sources ask: “In the event that the Authority makes the decision to maintain support for basic materials and the remaining reserve of about $ 800 million is exhausted outside the banks’ mandatory reserves, where will it come from? the BDL with the funds to cover the support? Will leaders, tycoons and politicians get the necessary funds?
And he adds: “There is one of two solutions in this case: either the process of leasing the gold reserves or part of them abroad, or the process of reducing the mandatory reserve in hard currencies by a certain percentage, with the in order to secure some 3 or 4 billion dollars that will allow the Banque du Liban to endure and continue to subsidize the materials. the basics”.
And he adds: “These are the two options available, quickly, in the hope that the negligent and hesitant authorities will agree to form an acceptable government, followed by an agreement with the International Monetary Fund, the supporting countries and the international donor institutions, without delay or delay, so that the world can provide us with the financial help we need to grow. From the well in which we are ”.
However, financial sources confirm that “the governor of the Banque du Liban will not reduce the mandatory reserve ratio and will use the funds released to continue supporting basic materials, and cannot do so without a decision and coverage from the official constitutional authorities.”
And he emphasizes: “In the event that the mandatory reserve ratio is reduced from 15% to 10%, for example, then the 5% released is bank money and is returned to it, and cannot be disposed of by the Banque. du Liban, except in the event that the laws and official decisions of the competent constitutional authorities that allow it are modified. “, Warning of” a confrontation that will inevitably occur between the Association of Banks and the government authorities, in the event that a decision is made to impose and without an agreement on the matter. “
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