Lebanon backs key importers amid fears of dollar shortage

BEIRUT Lebanon's central bank is to facilitate

access to dollars for importers of petroleum products, wheat and medicine,

state media said Tuesday, following fears of a dollar shortage and possible

currency devaluation.

Economic growth in Lebanon has plummeted in the wake of repeated political

deadlocks in recent years, compounded by eight years of war in neighbouring


Local media said last week banks and money exchange shops were rationing

dollar sales in the country, where Lebanese pounds and US dollars are used

interchangeably in everyday transactions.

Petrol station owners threatened to strike over a lack of dollars at a

fixed exchange rate to pay for imports, while flour producers complained they

had to resort to much higher rates from money changers.

The central bank on Monday adopted the measure to allow certain importers

to obtain dollars at the bank rate to pay for key imports.

Banks that issue letters of credit for the importation of petroleum

products (petrol, fuel oil and gas), wheat and medicine will be able to ask

the Banque du Liban to ensure the value of such credits in US dollars, read

the decision published by the National News Agency.

The mechanism requires that a special account be opened at the central

bank, and at least 15 percent of the value of the credit be deposited in it

in US dollars, as well as the full value in Lebanese pounds, it said.

The central bank will take 0.5 percent from each transaction.

Lebanon has had a fixed exchange rate of around 1,500 Lebanese pounds to

the dollar in place since 1997.

'Contain the crisis'

Central bank governor Riad Salameh last week denied that the country was

facing a currency reserve crisis, but it has become very difficult to

withdraw dollars from ATMs in Beirut.

Lebanese economist Jad Chaaban said the central bank measure was a welcome

short-term solution to allow key products into the country.

It's a good measure to contain the crisis on importing these commodities

and to keep the prices in check, said the associate professor at the

American University of Beirut.

And it will ease pressure on the non-bank exchange rate, he said.

But he also called for the broader easing of capital controls keeping

dollars in the banks, and fundamental economic reforms including to reduce

dependency on imports.

On Tuesday, the finance ministry said rating agency Moody's has warned it

could lower Lebanon's sovereign credit rating within three months if the

country does not redress its economy.

Moody's already downgraded the rating from B3 to Caa1 at the start of

the year, citing debt risks, while fellow agency Fitch followed suit in


Lebanon's public debt stands at around $86 billion � more than 150

percent of gross domestic product (GDP) � according to the finance ministry.

Eighty percent of that debt is owed to Lebanon's central bank and local


In July, parliament passed an austerity budget as part of conditions to

unlock $11 billion in aid pledged at a conference in Paris last year.

Source: Bangladesh Sangbad Sangstha (BSS)