BEIRUT – Lebanon’s central bank governor said nobody was running the country as he defended his decision to halt fuel subsidies that have drained currency reserves, saying the government could resolve the problem by passing necessary legislation.
In an interview broadcast on Saturday, governor Riad Salameh pressed back against government accusations that he had acted alone in declaring an end to the subsidies on Wednesday, saying everyone knew the decision was coming.
The move is the latest turn in a crippling financial crisis that has sunk the Lebanese pound by 90% in less than two years and pushed more than half the population into poverty.
Salameh said Lebanon could recover but it was not possible to say how many years that would take. “So far you have nobody running the country,” he said in the interview with Radio Free Lebanon.
The Lebanese pound was “hostage to the formation of a new government and reforms”, he said.
Lebanon’s sectarian politicians have failed to agree on a new government since Prime Minister Hassan Diab quit last August after the catastrophic Beirut port blast. He has continued in a caretaker capacity since then.
The central bank announced on Wednesday it would provide credit lines for fuel imports at market rather than subsidised exchange rates, paving the way for a sharp increase in fuel prices, which the government has said must not change.
Fuel importers have demanded clarity, saying they cannot import at market rates and sell at subsidised rates, that are fraction of the currency’s real price.
The fuel crisis has hit a crunch point, with hospitals, bakeries and many businesses scaling back operations or shutting down completely.
The central bank has said it cannot use mandatory foreign currency reserves, a portion of deposits set to one side by law, without legislation.
Salameh said such reserves had reached $14 billion.
Critics of the fuel subsidy scheme say it has created huge incentives for smuggling and hoarding by selling petroleum products at a fraction of their real price.
Salameh said that more than $800 million spent on fuel imports in the last month should have lasted three months, blaming traders and saying it was “unreasonable” that so much had been spent with no product available in the market.