‘Lebanese trade minister says central bank was asked to halve rates’

Lebanon’s caretaker trade minister, Mansour Bteish, said on Sunday that he and others had asked the central bank governor and commercial banks to reduce interest rates by roughly half as part of measures to stem a financial crisis.

Since protests erupted across Lebanon on October 17, pressure has piled on the financial system, with banks putting tight curbs on dollar withdrawals and transfers amid fears of capital flight and an acute dollar shortage.

Bteish told the Lebanese broadcaster AlJadeed that the central bank governor, Riad Salameh, had cited data showing that about $4bn in hard currency had been withdrawn from Lebanese banks since September.

Bteish said the meeting, held at the presidential palace to discuss tackling the financial crisis, had ruled out a haircut on the value of deposits or a change to the dollar peg that governs the exchange rate of the Lebanese pound.

“We requested a reduction for interest rates in Lebanese pounds and dollars of about 50% ... and we asked that the governor, with the (bank) association, find the mechanisms for implementing this” said Bteish.

He said the meeting discussed proposals for securing financing for essential imports like food, medicine and raw materials, and how to improve access to cash for Lebanese hit by the tough bank restrictions.

A government source and senior banking source said the central bank would announce a package of measures early this week, including the roughly 50% reduction in interest rates, to stimulate the economy and decrease the cost of borrowing.

Commercial banks began offering interest rates as high as 14% earlier this year on longterm deposits.

Lebanon’s central bank has used high interest rates to attract dollars from commercial banks and keep government finances afloat.