Lebanon's Salameh Says Can No Longer 'Exhaust' Foreign Currency Reserves

FILE PHOTO: Lebanese Central Bank Governor Riad Salameh speaks during a news conference in Beirut, Lebanon, November 11, 2019. REUTERS/Mohamed Azakir/File Photo
FILE PHOTO: Lebanese Central Bank Governor Riad Salameh speaks during a news conference in Beirut, Lebanon, November 11, 2019. REUTERS/Mohamed Azakir/File Photo
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Lebanon's Salameh Says Can No Longer 'Exhaust' Foreign Currency Reserves

FILE PHOTO: Lebanese Central Bank Governor Riad Salameh speaks during a news conference in Beirut, Lebanon, November 11, 2019. REUTERS/Mohamed Azakir/File Photo
FILE PHOTO: Lebanese Central Bank Governor Riad Salameh speaks during a news conference in Beirut, Lebanon, November 11, 2019. REUTERS/Mohamed Azakir/File Photo

Lebanon's Central Bank Gov. Riad Salameh said in statements on Thursday that the economy is suffering from major problems with the complete absence of any solutions.

His remark came during the monthly meeting between Salameh and the delegation from the Association of Banks.

“The economic plan is not put into practice and there is no clarity on how to deal with the consequences of stopping payment (Default), which left a great shock to the economy and the financial sector," Salameh said.

"The negotiations with the International Monetary Fund are still pending. If this situation continues, there will be no return to growth and economic revitalization,” he added.

The governor reiterated that BDL can no longer exhaust the remaining foreign currency reserves to subsidize fuel oil, wheat and pharmaceutical in a few months.

“I informed the government not to use BDL’s compulsory reserve in foreign currencies for the purpose of subsidies. We can continue supporting fuel, wheat and medicine for another two or three months at an exchange rate of LL1,500 against the dollar.”

He added that subsidizing food stuff at a rate of LL3,900 will also end in two or three months.

According to Salameh, the public Treasury is suffering as well as the economy due to the high budget deficit.

However, the governor said that the BDL and the Banking Control Commission will take all the procedures legally available to reactivate the sector’s contribution to financing the economy.

“Capitalization and liquidity are essential for financing the economy and the sustainability of the sector is linked to its ability to renew itself,” he noted.

In response to a question about the decline in the external assets of the Banque du Liban between Sept. 15 and 30, by $2.2 billion, the governor explained that this is mainly due to the repayment of BDL loans in dollars by banks.



Eight OPEC+ Alliance Members Move toward Output Hike at Meeting

FILE PHOTO: OPEC logo is seen in this illustration taken, October 8, 2023. REUTERS/Dado Ruvic/File Photo
FILE PHOTO: OPEC logo is seen in this illustration taken, October 8, 2023. REUTERS/Dado Ruvic/File Photo
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Eight OPEC+ Alliance Members Move toward Output Hike at Meeting

FILE PHOTO: OPEC logo is seen in this illustration taken, October 8, 2023. REUTERS/Dado Ruvic/File Photo
FILE PHOTO: OPEC logo is seen in this illustration taken, October 8, 2023. REUTERS/Dado Ruvic/File Photo

Saudi Arabia, Russia and six other key members of the OPEC+ alliance will discuss crude production on Saturday, with analysts expecting the latest in a series of output hikes for August.

The wider OPEC+ group -- comprising the 12-nation Organization of the Petroleum Exporting Countries (OPEC) and its allies -- began output cuts in 2022 in a bid to prop up prices.

But in a policy shift, eight alliance members surprised markets by announcing they would significantly raise production from May, sending oil prices plummeting.

Oil prices have been hovering around a low $65-$70 per barrel.

Representatives of Saudi Arabia, Russia, Iraq, United Arab Emirates, Kuwait, Kazakhstan, Algeria and Oman will take part in Saturday's meeting, expected to be held by video.

Analysts expect the so-called "Voluntary Eight" (V8) nations to decide on another output increase of 411,000 barrels per day (bpd) -- the same target approved for May, June and July.

The group has placed an "increased focus on regaining market shares over price stability," said Saxo Bank analyst Ole Hansen.

Enforcing quotas

The group will likely justify its decision by officially referring to "low inventories and solid demand as reasons for the faster unwind of the production cuts", UBS analyst Giovanni Staunovo told AFP.

But the failure of some OPEC member countries, such as Kazakhstan, to stick to their output quotas, is "a factor supporting the decision", he added.

According to Jorge Leon, an analyst at Rystad Energy, an output hike of 411,000 bpd will translate into "around 250,000 or 300,000" actual barrels.

An estimate by Bloomberg showed that the alliance's production increased by only 200,000 bpd in May, despite doubling the quotas.

No effect from Israel-Iran war

Analysts expect no major effect on current oil prices, as another output hike is widely anticipated.

The meeting comes after a 12-day conflict between Iran and Israel, which briefly sent prices above $80 a barrel amid concerns over a possible closing of the strategic Strait of Hormuz, a chokepoint for about one-fifth of the world's oil supply.

As fears of a wider Middle East conflict have eased, and given there "were no supply disruptions so far", the war is "unlikely to impact the decision" of the alliance, Staunovo added.

The Israel-Iran conflict "if anything supports a continued rapid production increase in the unlikely event Iran's ability to produce and export get disrupted," Hansen told AFP.