Confusion and panic prevail among the Lebanese, sparked 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 in order to continue subsidizing basic imports next year, from 15% to 12 or 10%. This is because there was only about 800 million dollars left that could be used to support imports of fuel, wheat and medicine until the end of this year out of about $ 17.9 billion, while the rest is the banks’ mandatory reserves at the Central Bank.
The chief economist of the Byblos Bank Group, Nassib Ghobril, explains, on the Lebanese Forces website, that “this topic was published only in a news agency, and nothing official was issued by the Banque du Liban. And in the event that this issue is discussed somewhere, perhaps only in the multiple meetings that are held on the issue of support and include officials, ministers, and several parties concerned with economic and financial affairs, and as one of the ideas that have been put forward without having an actual father.
He points out, “Moving the reserve requirement has monetary policy goals. So raising the reserve requirement ratio in any central bank in the world means withdrawing and reducing liquidity from the markets, and one of the goals is to curb inflation. While in the event of reducing the ratio, this means pumping liquidity through banks.
Ghobril asserts, “If the reserve requirement ratio is reduced from 15% to 12 or 10%, then the liberated sums should return to the banks, as happens in any central bank in the world according to the monetary policy objectives to pump or reduce liquidity,” pointing out that “we explain The issue is theoretically and technically speaking, because the governor of the Banque du Liban denied the news and confirmed (it is unfounded, and that any reduction in the mandatory reserve ratios, if it occurs, will go back to the owners of deposits at the Banque du Liban who are the owners of the banks, and not for any other purpose). ”
He points out, “This is what often happens with respect to reserve ratios. As for the event that there will be some agreement in the future between the Banque du Liban and the banks to use the released funds, then no one can speak about that day as it was not discussed, and nothing official was issued by the Banque du Liban.
And stresses, “The Banque du Liban is almost the only central bank in the world, which subsidizes the import of petroleum products, medicine, wheat, medical equipment, food basket and raw materials for industry and agriculture. While in general in all countries of the world the support is part of the budgets and the treasury secures it, while in Lebanon the burden is all on the central bank that fills the void left by the executive authority, ”considering that“ at least the responsibility and the cost must be shared between the two parties, bearing in mind that the responsibility must be That all be under the executive authority, as in Egypt and other countries in many countries.
Ghobril asserts, “The executive authority cannot impose on the BDL to reduce the compulsory reserve ratio in order 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, storage and smuggling.
The reserve bomb, which appears to be safe so far, its circumstances were clarified by concerned financial sources, in an interview with the “Forces” website, indicating that “with the beginning of the leakage of news about the Central Bank’s reserves touching the red line and the possibility of starting to lift subsidies on basic materials, claims began to intensify from The various political parties and bodies, the General Labor Union, social institutions, and popular sectors accepted the necessity not to raise the subsidies, because the living conditions and the rising poverty rate heralded social disasters if this happened.
However, the same sources ask, “In the event that the Authority takes a decision to maintain the support for basic materials and the remaining reserve of about $ 800 million runs out from outside the mandatory reserves of the banks, from where will the BDL come with the funds to cover the support? Will the leaders, magnates and politicians secure the required funds?
And she adds, “There is one of two solutions in this case: either the process of leasing the gold reserves or part of it abroad, or the process of reducing the mandatory reserve in hard currencies by a certain percentage, in order to secure about 3 or 4 billion dollars that allows the Banque du Liban to hold out and continue to subsidize the materials. the basic”.
And she adds, “These are the two options available, quickly, in the hope that the negligent and faltering authorities will agree to form an acceptable government, followed by an agreement with the International Monetary Fund, the supporting countries and international donor institutions, without delay or procrastination, so that the world can provide us with the financial aid needed to rise From the pit we are in ”.
However, financial sources confirm, “The Governor of the Banque du Liban will not reduce the compulsory reserve ratio and use the liberated funds to continue supporting basic materials, and he cannot do so without a decision and coverage by the official constitutional authorities.”
And stresses, “In the event that the compulsory reserve ratio is reduced from 15% to 10%, for example, then the 5% released is bank money and returns to it, and it cannot be disposed of by the Banque du Liban, except in the case of amending laws and official decisions of the competent constitutional authorities that allow this. “, Warning of” a confrontation that will inevitably occur between the Association of Banks and the ruling authorities, if a decision is taken to impose and without an agreement in this regard. ”