Lebanon central bank to regulate provision of funds for key imports


riad salamehLebanon’s central bank said on Tuesday that it will issue instructions in a week’s time to regulate the provision of funds to import wheat, fuel and medicine.

The bank said the decision came after consultations with the president, prime minister and finance minister but did not give additional details.

The Lebanese economy has suffered from a slowdown in capital inflows from abroad that have long been used to finance the government budget and current account deficit.

The central bank’s foreign assets, excluding gold, fell around 15% from an all-time high in May last year to $38.7 billion in mid-September.

Lebanese millers said on Tuesday wheat stocks had fallen to a dangerous level, warning the country may face a supply crisis unless dollars needed to import the grain are supplied at the official rate, the National News Agency reported.

In a statement, the Lebanese millers’ association urged officials to find a solution for dollars to be supplied at the official price “so the owners of the mills can resume their work and import the country’s wheat need”.

The Lebanese pound has been pegged against the dollar at a level of 1,507.5 pounds for more than two decades. Dollars and pounds are legal tender in Lebanon.

Central bank governor Riad Salame had said on Monday that dollars are available and banks were meeting customer demand. The central bank had not received any official complaints about dollar availability, he said.

Distributors of fuel, also complaining they are unable to secure their dollar needs at that price, went on strike last week, saying a lack of dollars at the official exchange rate was forcing them to pay more at money exchange houses.

The millers’ association said it was determined to supply flour to bakeries at the official Lebanese pound price “but the problem is that converting Lebanese pounds to U.S. dollars has become very costly”.

This had led millers to issue invoices in U.S. dollars “to preserve operating capital and the continuation of our work”.

“The wheat reserve at the mills has fallen to a level that represents a danger, and this may expose the country to a supply crisis if the U.S. dollar problem is not resolved,” it said.

Hassan Assaf, a member of the millers’ association, said banks had been gradually curbing supply of dollars for two months. Wheat reserves held by private millers had fallen to 1-1/2 to two months of supply from four months, he told Reuters.

“We can’t place import requests because we cannot secure dollars to open credit lines,” he said.

Prices charged by money exchange houses for dollars had touched as high as 1,580 pounds, he said.