Lebanon to pay public sector salaries in US dollars

The dollar payments are going to be made in August, as Lebanon hopes to "pump cash into the market through public sector employees."

Lebanon's acting central bank governor Wassim Mansouri on Friday said the government would pay public sector salaries for the month of August in US dollars.

Since Lebanon's economy began to unravel in 2019, the Lebanese pound has severely devalued.
What Lebanon's bank chief said

Mansouri told a press conference the plan was to use an exchange rate of 85,500 Lebanese pounds ($5.68 € 5.20) per US dollar to "pump cash into the market through public sector employees."

The finance chief said his bank would not print money to lend to the state or cover the crisis-hit economy's projected deficit. He urged leaders to take immediate action for financial reforms.

"We affirm today that the central bank will not cover the deficit by lending to the government, neither in dollars or in Lebanese pounds. Lebanese currency will not be printed to cover the deficit," he told reporters.

Lebanon's embattled central bank governor Riad Salameh, stepped down under a cloud of investigation and blame for his country's economic crisis.

Turbulent financial sector in Lebanon

Mansouri said the draft budget for 2023 entails a state deficit of 24%, equivalent to 46 trillion Lebanese pounds, approximately $500 million, using the collapsed currency's parallel rate, as calculated by Reuters.

Mansouri took over as head of the central bank on August 1, after the previous governor, Riad Salameh, ended his 30-year tenure with his legacy in tatters over corruption allegations, which he denies, and a turbulent financial sector.

Lebanese pound devaluation

As Lebanon's currency has plummeted, depositors have been locked out of their bank savings and families have been driven into poverty.

But the country has failed to enact reforms demanded by the International Monetary Fund (IMF) to gain access to $3 billion in aid. Mansouri said that further delaying reforms "risks isolating the country from the global financial system.”

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A financial crime watchdog this year warned Lebanon could be placed on a gray list under special scrutiny over unsatisfactory practices to prevent money laundering and terrorism financing unless the required reforms are enacted.

ai/rc (Reuters)