Listen to the article
With the end of Banque du Liban Governor Riad Salameh’s term of office, the government is working hard, along with the four BDL vice-governors, to ensure the smooth management of the financial sector, pending the appointment of a replacement for Salameh.
The first vice-governor Wassim Mansouri, who held a press conference in the morning to announce the broad outlines of the policy he intends to follow, took part in the government meeting in the afternoon, during which the terms and conditions of state financing by the central bank were examined, along with the fate of the Sayrafa platform.
According to information obtained by This is Beirut, the Banque du Liban is set to suspend new exchange requests at the Sayrafa rate, pending a decision on the platform’s operating mechanism and fate at meetings of the BDL Central Council. These will be chaired by Wassim Mansouri.
However, this does not mean that the platform rate will no longer exist (LBP 85,500 to the dollar on Monday). Only new conversion requests via commercial banks should stop for the time being.
What is behind this decision? BDL is awaiting approval of the draft law that the government has prepared, which will determine at what level the financial institution may intervene in the foreign exchange market. On this basis, BDL will specify the new Sayrafa mechanism… or another platform.
An 18-month loan renewable once only
In this respect, Najib Mikati handed the draft law requested by Mansouri to the ministers, which “allows the government to borrow in foreign currencies from the central bank in order to finance civil servants’ salaries.”
The text establishes the amount of the loans and the conditions under which the Lebanese State can borrow in dollars from the BDL, and repay the sum in dollars over a period of 18 months. The State will repay the loan from its revenues. This mechanism may be renewed once only.
The bill will allow the Banque du Liban to draw legally on its mandatory reserves.
Once the State has taken all it needs to subsidize the purchase of certain medicines, pay for fuel, electricity, and civil servants’ salaries, the remaining sum will enable the BDL to intervene on the foreign exchange market through Sayrafa and determine the volume of demand. Within the framework of the law, the government will set the amount that the central bank will be able to use on the foreign exchange market to maintain monetary stability, provided that this is done through a banking platform or any other platform that is created.
The big question is whether Sayrafa will be maintained or whether another platform will be set up. In any case, during the transitional phase, Sayrafa will be effective according to the quota determined by the law that Parliament is due to vote on.
This will be examined in greater depth at a second government meeting, during which Wassim Mansouri will answer questions from the ministers, as explained by the caretaker Minister of Information Ziad Makari, after the government’s session. Mansouri had been invited to Monday’s session to present his ideas, he said. In my opinion,” added the Minister, “what he proposes corresponds to the position of the government, which has already sent draft reforms to Parliament.”
At the same time, the Council of Ministers discussed the draft Budget for fiscal 2023. According to sources at the Ministry of Finance, the caretaker government is well advanced in its study of the text. The government needs four to five more sessions to complete it, said Ziad Makari, pointing out that two Councils of Ministers are scheduled for this purpose, on Tuesday and Thursday, at 3:30 pm.
