Riad Salameh: In Lebanon, depositors’ money is still available

Riad Salameh: In Lebanon, depositors’ money is still available
Riad Salameh told Arab News en Français he was in favor of the audit of the Banque du Liban (BDL) by experts from the Bank of France. (AFP/File)
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Updated 25 August 2020

Riad Salameh: In Lebanon, depositors’ money is still available

Riad Salameh: In Lebanon, depositors’ money is still available
  • Central Bank chief says he supports IMF involvement in Lebanon, Macron’s proposal for audit of BDL by Bank of France experts
  • Governor working on other means of financing, reassures depositors they ‘will get their money back, even if it takes time’

Riad Salameh has long been perceived as the strongman of Lebanon, the guardian of an economic model that has been the envy of many throughout the region. A skilled financier, he guaranteed the stability of the Lebanese pound for nearly 30 years and was awarded by the largest financial institutions. The banker saw his life change, however, with the October 2019 uprising and the economic collapse, which have mired the Land of the Cedars in turmoil.

Since then, Salameh has come under fire. He is accused of having misused the money of Lebanon’s citizens by granting funds to the government, which have been wrongly managed by a political class corrupt to the bone.      

Bank of France experts  

In an exclusive interview with Arab News en Français, Salameh defended himself against these accusations, which he considers “unfair.” He claims to be in favor of the audit of the Banque du Liban (BDL) by experts from the Bank of France in order to advance negotiations with the International Monetary Fund (IMF). The audit was proposed by French President Emmanuel Macron, who is visiting Lebanon after the explosion at the port of Beirut on Aug. 4.  

“An audit of the BDL, going back to 1993, was conducted by two international firms,” recalls Salameh. “The latest reports of this audit were sent to the IMF at the beginning of the negotiations. It is therefore important to acknowledge that this international audit exists, to dismiss any doubts about the way the BDL is managed. We welcome the proposal of the Bank of France to audit the BDL. The decision is the responsibility of the Bank of France, but we are ready to welcome their experts at their convenience.”  

On April 30, the government announced an economic recovery plan and requested assistance from the IMF, from which Beirut hopes to secure about $10 billion in aid. Lebanon initiated negotiations with the fund, but nearly three months later, the process stalled.

Opinion

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While he admits that Lebanon must negotiate with the IMF, Salameh stresses that he is in favor of “an IMF involvement in Lebanon, even though some have claimed otherwise.” During the negotiations, however, a parliamentary committee and the government diverged on the estimations of the public deficits, those of the Central Bank and those of the banks: from 60,000 to 241 trillion Lebanese pounds (i.e. tens of billions of dollars). The IMF then required a unified assessment.

“The approach we have adopted is different from the government’s plan,” says Salameh. “The differences stem mainly from the fact that, in our approach, we did not consider that we should have reductions in the debt in Lebanese pounds. We also did not take into account differences in the exchange rate. As a matter of fact, half of the losses attributed to the Central Bank in the government plan stem from the fact that the Cabinet varies the price of the dollar from 1,500 pounds to a dollar to 3,500. It is this loss that we have not taken into account. The differences are therefore due to the initial assumptions, not to mention differences regarding non-performing debts.  

“Our goal was to reduce losses while remaining transparent, but it was mainly about reducing the constraints that the Lebanese have to endure because of the reforms undertaken in light of the current crisis,” he says.  

Asked why the IMF did not accept the BDL figures, Salameh said: “The fund has its own principles and concepts. But it is up to the Lebanese to negotiate now because the real goal is to be able to find a way out of the crisis which, for Lebanon, means international support, essentially. And the latter will not take place without the support of the IMF or a political agreement.”

Slow-coming reforms  

Amid the grave economic crisis, the country has been experiencing an unprecedented depreciation of its currency for several months, as well as soaring prices, large-scale layoffs and draconian banking restrictions on withdrawals and transfers abroad.    

Deemed incompetent and corrupt and accused of having “lent” depositors’ money to the government, Salameh defended himself, claiming that the central bank “did not take the depositors’ money.”

“It must be clear that the BDL has essentially given loans in Lebanese pounds, which is a currency that the Central Bank issues itself.  

“It is not realistic to empower the Central Bank as a conduit between depositors, banks and the government. We have the capacity to print Lebanese banknotes, so there is no need to use the banks’ money. As a reminder, most of the debt we owe to the government is in Lebanese pounds. You will ask me then where the country’s foreign exchange reserves were used ... Over the past five years, the current account has had a cumulative deficit of $56 billion, and the budget deficit was $25 billion. This total amount of $81 billion is Lebanon’s financial gap. It is not linked to the Central Bank at all, but rather comes from the government’s import and deficit figures,” Salameh continued.  




Salameh and the Central Bank have been the target of anti-government protesters as Lebanon's economy collapsed in recent years. (AFP/File)

As for the question of why the governor continued to reassure the Lebanese people and did not instead alert the government to the danger of the deficit, given that he was in control of the country’s finances, Salameh answered: “At the central bank, everything was in order. Personally, I have always called for reforms and deficit reduction in all my speeches — some of which were with you actually. I declared that we were in control of the monetary situation, but I have never given reassurances regarding the state of the public finances. I have reiterated and stressed the need for reforms to preserve monetary stability. At the Paris I, II, and III conferences, as well as at the Cedar conference, I demanded that there be reforms.” 

Although the Lebanese government adopted its economic bailout at the end of April to boost growth and clean up public finances, reforms, particularly in the electricity sector, are struggling to materialize.  

In this regard, Salameh pointed out that the Central Bank has lent money to the government “by legal obligation.”

He said: “It’s not like we went to place investments with the Lebanese government. Article 91 of the Currency and Credit Code obliges the Central Bank to finance the government when the latter requests it. In the budgets voted by parliament in 2018, we were requested to lend $6 billion in Lebanese pounds, at an interest rate 1 percent lower than the usual adopted interest rates. In 2019, another law was enacted for the BDL to lend $3.5 billion in Lebanese pounds at 1 percent interest rate. As for the 2020 budget, a law has requested us to repay the interest we receive on the portfolio we have with the state, and also to repay a trillion Lebanese pounds. In other words, $3 billion. It is not really fair to say that the Central Bank and its governor painted a rosy picture for the Lebanese people. I wonder if there are no bad intentions behind this image they are trying to give of us.” 

While he accuses those in power of having such “bad intentions” toward him, Salameh believes that this may be motivated by “local politics, ideological reasons, or opportunism,” but says that “falsifying realities in recent months” has really “surprised” him. 

Regarding the criticisms leveled against him for having based his financial strategy on a gigantic “Ponzi scheme,” with financial engineering and loans that were costly for Lebanon, Salameh replied: “When you look at the transactions carried out between the banks and the Central Bank, and at the figures between 2017 and June 2020, you will see that the Central Bank has issued foreign currency liquidity to the market and banks in addition to collecting money from banks. You will be surprised to find that we injected much more money than we took out: 11.5 billion.” 

‘The depositors’ money is here’ 

How, then, does Salameh explain the fact that banks have run out of money? “This money went into the trade balance deficit. Ponzi would not be proud of us because, in principle, it is the Central Bank that should have benefited if there were really a Ponzi scheme in place,” he explained. 

He added: “There have been back-to-back shocks that put pressure on banks, creating panic among depositors, including the closure of banks in October for a month at the beginning of the protests. This turned the Lebanese economy into a ‘cash economy.’ People lost faith in the system. Then came the government’s declaration that the country was unable to repay the maturities of its national debt on Eurobonds. I was personally against this and expressed as much officially.” 

On March 7, Lebanon, which is currently crumbling under a debt of $92 billion (170 percent of its gross domestic product), defaulted on a first installment of its debt, amounting to $1.2 billion. On March 23, Lebanon also announced that it would not be paying all of its treasury bills issued in dollars. 

Salameh said: “This unfortunately prevented Lebanon from gaining access to international markets and international bank credits, which paralyzed us. Then came the effects of the COVID-19 pandemic and the port explosion. The system is still holding up amid all of this. The depositors’ money is here. Depositors are gradually withdrawing it, investing in real estate, and getting loans. The only problem lies in international transfers, and these will be resolved once the reforms are implemented and confidence is restored. We discussed the goal of the government’s plan. We are against haircutting depositors. We intend to give depositors their money back. It may take a while, but they will get it back. Many depositors have already invested in real estate to maintain the value of their deposits.” 

However, many Lebanese complain that the haircut is applied de facto, since dollar depositors can only withdraw a limited amount of their money in Lebanese pounds, at the rate of 3,800 pounds to the dollar, while the black-market rate currently hovers around 8,000 Lebanese pounds to the dollar. 

“The market and the demand decide that,” said the governor. “There is no law that takes money away from people, and that difference is critical. Today, we certainly have different prices for the dollar, but the official rate as well as the rate charged for imports and that of the black market vary because we have become a cash economy. There is evident pressure amid all these events. The Aug. 4 explosion destroyed many homes, and people are in need of cash, especially since merchants only accept cash. But there is no law that says this. What the market decides is different from what the legislator does.” 

He continued: “Today, the Cabinet is thinking of creating a fund to bring together real estate and give currency certificates to the Central Bank from this fund, which will be able to reduce losses without increasing debt and maybe create the necessary symmetry to execute the plan. The idea is still recent; the minister of finance has just introduced it.” 

Heading toward the end of subsidies? 

A few days ago, an official source at the Central Bank revealed to Reuters that the BDL would only be able to provide subsidies on fuel, medicine and wheat for three months, a statement the governor confirmed. 

“The BDL is doing its best, but it cannot use the reserve requirements of banks to finance trade,” he said. “Once we reach the threshold of these reserves, we will be forced to stop funding. Nevertheless, we are in the process of creating other means of financing, whether through banks or through a fund that we have set up abroad, called ‘Oxygen.’ However, the BDL is not the government, and it is the government that must take action. The Central Bank cannot be held accountable for everything and then be blamed for what it does afterwards. We have laid out the situation well in advance. Let those responsible take the necessary measures.” 

Asked about the colossal amounts pulled out of Lebanon by bankers and politicians before Oct. 17 and about the possibility of retracing their course, the governor said: “We will soon issue a circular to hold these depositors accountable and encourage them to bring significant liquidity back to the country without confiscating their money. Today, it is a matter of ethics — not a legal one — because it is a system that has benefited everyone. The BDL must empower these depositors who can restore liquidity in the banking sector by refinancing the country through external deposits.” 

Lastly, accused by some of having taken advantage of the system for his personal enrichment, Salameh replied that he made a good living well before becoming governor of the BDL, with a salary of $165,000 per month at the Merrill Lynch bank. “I showed all the documents on television. I arrived at the BDL with a fortune of $23 million, which was invested and which produced results. I am accused of having siphoned off billions. My answer is clear: Since I can validate the source of my fortune, it is enough to prove that I am not abusing my position. In fact, I have sued those who have defamed me.” 

Is the end of the crisis near? “It is primarily political,” said Salameh. “It is mainly regional tensions that have gained the upper hand in Lebanon, and international support is needed to create liquidity in the country. I have no doubt that the Lebanese people will be able to manage afterwards.” 


UAE to build waste-to-energy plants to burn two thirds of trash

UAE to build waste-to-energy plants to burn two thirds of trash
Updated 30 July 2021

UAE to build waste-to-energy plants to burn two thirds of trash

UAE to build waste-to-energy plants to burn two thirds of trash
  • Dubai is building a $1.1 billion waste-to-energy plant
  • Sharjah, Abu Dhabi also constructing facilities

RIYADH: The UAE plans to build a series of waste incinerators that will eventually burn up to two thirds of the country’s trash to deal with a growing refuse problem.

Dubai is constructing a $1.1 billion waste-to-energy facility, one of the largest in the world, while a smaller plant in being built in Sharjah and will begin operation this year, Bloomberg reported. Two further projects are being built in Abu Dhabi.

Burning trash creates carbon emissions, potentially making it harder for the UAE to reach its target of becoming carbon neutral by 2050.

However, Bee’ah, Sharjah’s waste company, will try to mitigate this by creating green spaces, install a 120-MW solar array on top of the plant and produce hydrogen from the garbage to fuel its rubbish trucks. Sharjah will also be able to close its landfill site.

Bee’ah CEO Khaled Al Huraimel said he wants to export the model across the region, including Saudi Arabia.

While environmentalist favor recycling over burning of trash, turning plastics and other waste into usable products is extremely challenging.

China’s recent ban on the importation of waste “has really changed the economic drivers,” said Mr.John Ord, a UK business director at engineering firm Stantec. “All of a sudden, we have a lot of waste that needs to be dealt with.”


Bitcoin tests the $40k resistance level

Bitcoin tests the $40k resistance level
Updated 30 July 2021

Bitcoin tests the $40k resistance level

Bitcoin tests the $40k resistance level

RIYADH: Bitcoin traded higher on Thursday, rising by 0.03 percent to $39,670.54 at 4:02 p.m. Riyadh time. Ether, the second-most traded global cryptocurrency, was up 0.44 percent to $2,291.72.05, according to data from CoinDesk.

Below is the latest news from the world of cryptocurrency:

Bitcoin buyers have been profitable, as the cryptocurrency tests the $40,000 resistance level. Sentiment has improved significantly over the past week, although some analysts believe it is time to pause before rallying again.

In a CoinDesk report, Justin Chuh, a senior trader at Wave Financial, said: “Bitcoin easily broke through $35,000, but I think it will probably have a harder time going through $40,000 this time.”

But attitudes could easily shift from bullish to bearish as bitcoin was still in a consolidation phase with strong resistance, the report added.

HIGHLIGHT

Bitcoin buyers have been profitable, as the cryptocurrency tests the $40,000 resistance level. Sentiment has improved significantly over the past week, although some analysts believe it is time to pause before rallying again.

Meanwhile, in a research paper published on Wednesday, Bank of America described central bank digital currencies as a more efficient payment system than cash. The second-largest bank in the US by total assets, said that digital central bank currencies could completely replace cash in the distant future.

A report released in May by blockchain infrastructure platform Bison Trails found that around 80 percent of central banks were exploring using digital currencies, with CoinDesk reporting that 40 percent were already testing proof-of-concept programs.

London-based Fabric Ventures has closed a $130 million fund to invest in early stage blockchain companies. One of its supporters is the European Investment Fund, which provided $30 million, marking the first time a European Commission company had invested in a fund focused on digital assets, said CoinDesk.

Stock and cryptocurrency trading app Robinhood has received a $32 billion valuation with its initial public offering and was set to debut on the Nasdaq on Thursday.

In a press statement on Wednesday, Robinhood priced its offering at $38 per Class A common share. The price is at the lower end of the $38 to $42 share price range that the company had targeted, and it planned to sell 5.5 million shares targeting an increase of $1.89 billion.

The firm is trying to reshape its image and said it was working on a new feature that would help protect users from cryptocurrency price volatility, while hiring a former Google graduate to improve the overall product design, according to CoinDesk.


Arab celebrity message app Yela raises $2.2 million funding

Yela has secured over a hundred A-list celebrities who fans can connect with, including Amr Diab. (Supplied)
Yela has secured over a hundred A-list celebrities who fans can connect with, including Amr Diab. (Supplied)
Updated 30 July 2021

Arab celebrity message app Yela raises $2.2 million funding

Yela has secured over a hundred A-list celebrities who fans can connect with, including Amr Diab. (Supplied)
  • The interactions on the platform can range from direct text messages to video clips

JEDDAH: Yela, a platform allowing users to get personalised video messages from their favorite Arab celebrities, has secured $2.2 million in funding, it was announced on Thursday.

Set to launched in August, Yela secured funding from US and UK investors with offices in London, Cairo, and Dubai. Participating from Silicon Valley is Razmig Hoghavian, a board member of Rakuten and General Partner at Graph Ventures.

The application was founded by Alex Eid, who said in a statement: “It’s incredible to see the support that Yela has already received from all sides, investors, celebrity creators, and fans.”

The first round of funding was also led by US investors Justin Mateen, a co-founder of Tinder and the General Partner of JAM Fund, and Sean Rad, a general partner at RAD Fund and also a co-founder of Tinder.

Yela has secured over a hundred A-list celebrities who fans can connect with including Amr Diab, Haifa Wehbe, Youssra, Mohamed Henedy, and Ahmed AlSakka. The interactions on the platform can range from direct text messages to video clips, with prices starting from $100.

 

 


Saudi Arabia to use 4IR to transform energy sector, fight climate change

Economy and Planning Minister Faisal Al-Ibrahim (L), Saudi Energy Minister Prince Abdul Aziz bin Salman (C) and Finance Minister Mohammed Al-Jadaan at the 4IR forum. (Screenshots)
Economy and Planning Minister Faisal Al-Ibrahim (L), Saudi Energy Minister Prince Abdul Aziz bin Salman (C) and Finance Minister Mohammed Al-Jadaan at the 4IR forum. (Screenshots)
Updated 29 July 2021

Saudi Arabia to use 4IR to transform energy sector, fight climate change

Economy and Planning Minister Faisal Al-Ibrahim (L), Saudi Energy Minister Prince Abdul Aziz bin Salman (C) and Finance Minister Mohammed Al-Jadaan at the 4IR forum. (Screenshots)
  • Ministers laud the technology at forum for Fourth Industrial Revolution in Riyadh
  • 4IR is a way of describing the blurring of boundaries between the physical, digital, and biological worlds

DUBAI/RIYADH/JEDDAH: Saudi Arabia is aiming to use Fourth Industrial Revolution (4IR) technology to fundamentally transform the energy sector, enhance the security of its water and food resources, and fight climate change, senior ministers announced.

“Our vision is to transform the energy sector through the application of data and technology,” Saudi Energy Minister Prince Abdul Aziz bin Salman said during the 4IR forum in Riyadh on Thursday.

“Saudi Arabia has a rich resource of youthful innovators who can be entrusted with the task of seeing this transformation through to fulfillment. The synergy between youth and technological innovation will make Saudi Arabia a dynamo for the digital transformation of the energy sector.”

4IR is a fusion of advances in artificial intelligence, robotics, the Internet of Things (IoT), genetic engineering, quantum computing, and more. It is a way of describing the blurring of boundaries between the physical, digital, and biological worlds.

The application of 4IR technology in energy will enable the Kingdom to lead the way in the battle against climate change, the Saudi energy minister said. 

“Perhaps the most important area where technology and energy can combine to the benefit, not just of the Kingdom, but of all mankind, is in the search for cleaner energy,” Prince Abdul Aziz said. “Here, we can use the technology of the 4IR to accelerate the energy transition, and meet the goals for the reduction in greenhouse gas emissions.”

His view was echoed by Ahmed Al-Zahrani, assistant minister for energy, who highlighted the potential of 4IR technologies like IoT and Blockchain. 

“These will help our endeavors to improve efficiency and reduce emissions,” Al Zahrani said.

The Kingdom is known for its energy security as it has been endowed with huge energy resources, but when it comes to food and water security, the country is facing challenges. Adding 4IR applications can address these challenges, Saudi Minister of Environment, Water and Agriculture Abdul Rahman Al-Fadli told the conference. 

Al-Fadli also said 4IR applications such as the use of remote sensors, artificial intelligence, and robotics will help the farming sector in Saudi Arabia as the technologies will provide better data from the fields. He also mentioned that these applications will assist the Kingdom in its plan to plant billions of trees under its green initiative.

“The challenge we all face is to tackle the great issues of the world today, like post-pandemic economic recovery, energy reliability, and sustainability,” Prince Abdul Aziz said.

In other developments from the forum, Ahmed Al-Saadi, senior vice president for technical service at Saudi Aramco, said the oil company had developed its technology for many years, notably in monitoring conditions in oil reservoirs. He said Aramco had made great strides in technology and was among the “best in class” operators in the global energy peer group.

Mohammed Abunayyan, chairman of ACWA Power, the utility developer backed by Saudi Arabia’s Public Investment Fund, told the forum most of its operations were now digital and that essential maintenance was controlled and managed through digital functions.

Abunayyan also said the involvement of the private sector in the digitization of energy was crucial: “The private sector will always deliver better value than the public utility model.”

Jason Bordoff, Dean of the Columbia Climate School in New York, had a warning about the slow progress towards the Paris Agreement goal of reducing CO2 emissions.

“We are not on track to meet those goals,” he said. “We need emissions to decline faster.”

Melissa Lott, research director at Columbia’s energy policy center, said carbon capture, utilization, and storage — a big element in Saudi Arabia’s Circular Carbon Economy framework — was crucial to efforts in reducing emissions.


New center to lead Saudi role in ‘4th industrial revolution’, economic minister says

New center to lead Saudi role in ‘4th industrial revolution’, economic minister says
Updated 30 July 2021

New center to lead Saudi role in ‘4th industrial revolution’, economic minister says

New center to lead Saudi role in ‘4th industrial revolution’, economic minister says
  • The Saudi minister said the new center will contribute to global discussions on the use of 4IR technology, such as 5G and artificial intelligence

DUBAI: The Saudi Centre for the Fourth Industrial Revolution (4IR) will lead the Kingdom’s role in utilizing advanced technologies and their local and global implications, Minister of Economy and Planning Faisal bin Fadel Al-Ibrahim said.

The Saudi minister said the new center will contribute to global discussions on the use of 4IR technology, such as 5G and artificial intelligence, especially amid the COVID-19 pandemic that has introduced new challengers to countries.

“COVID-19 intensified the need for data and evidence-based iterative policymaking supported by technology-driven and innovation-based solutions,” he said at the first Saudi 4IR forum held in Riyadh.

The Kingdom has become a global role model in deploying digital technology at peak of the health crisis, Al-Ibrahim said, enumerating Saudi efforts to manage the pandemic.

The Kingdom is known for its energy security as it has been endowed with huge energy resources, but when it comes to food and water security, the country is facing challenges.
(Shutterstock)

Saudi Arabia ranks 4th in the world in 5G connectivity, he added, and a robust digital infrastructure helped the Kingdom overcome challenges in the education and finance sectors.

Over 850 thousand daily classes were executed for over 6 million students in 2020, and around 2.8 billion digital payment transactions were made.

“This demonstrates Saudi`s leadership in having the most modern digital platform and world class capabilities to design local and global solutions at the technological frontier,” the minister said.

A recent report by the United Nations Conference on Trade and Development said the technology market could reach the value of 3.2 trillion dollars in 2025, increasing by almost 10 times from 2018 figures.

Al-Ibrahim said the Saudi economy could benefit from this by capturing a slice of the industry over the next five years.

The Kingdom is already in a good position, he explained, saying it “has its work cut out for it to move up the Global Innovation Index rankings where we plan to be among the leading pack of our G20 peers.”

“We are passionate about the objectives and vision of the Center, and look forward to working closely with its team in bringing the public and private sectors as well as the science and technology community together,” he added.