Before Lebanon's current financial crisis, central bank faced a $4.7 billion hole in reserves: IMF memo

Before Lebanon's current financial crisis, central bank faced a $4.7 billion hole in reserves: IMF memo
A member of the Lebanese security forces stands at the entrance of the Central Bank after anti-government protesters broke down a construction barrier. Getty Images
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Updated 28 October 2021

Before Lebanon's current financial crisis, central bank faced a $4.7 billion hole in reserves: IMF memo

Before Lebanon's current financial crisis, central bank faced a $4.7 billion hole in reserves: IMF memo
  • One of the deepest depressions in modern history, has propelled 74 percent of the population into poverty

Lebanon's central bank had a $4.7 billion hole in its reserves by the end of 2015 that was not disclosed to the public, an early warning sign of the financial collapse that has since all but wiped out many people's savings.


The figure is contained in an April 2016 report drawn up for Lebanese financial authorities by the International Monetary Fund and seen by Reuters.


The confidential report, known as an aide memoire, said that while the gross reserves of the Banque Du Liban central bank (BdL) were high at $36.5 billion, "reserves net of the commercial banks' claims on BdL and gold were negative USD 4.7 billion in December 2015".


Lebanon's central bank has been headed by Riad Salameh since 1993. In late 2016, it began what it called "financial engineering" - funding a ballooning fiscal deficit and keeping banks buoyant by paying ever higher interest rates for dollars.


By the time investor confidence wore out amid civil protests against the ruling elite in 2019, the central bank's losses had multiplied.


Three people with knowledge of the matter said Salameh himself had insisted to IMF officials that the figure not be published by the IMF on the grounds it would destabilise the financial market.


Asked why the negative net reserves figure was not published in a January 2017 IMF report, a central bank spokesperson, speaking on behalf of Salameh, said "the central bank does not have the power to change IMF reports" and declined to elaborate further on that point.


"The misrepresentation of the causes of the crisis to concentrate (blame) on the BdL is unprofessional and being used to throw responsibility onto one institution, the only civil institution still keeping the (financial) system alive despite the acute crisis," the spokesperson added.


An IMF spokesperson, asked by Reuters why the figure was left out of published reports and whether the Fund should have been more proactive in demanding remedial action, declined to specifically address the omission of the $4.7 billion, but said the report "provided an early warning as well as possible solutions to strengthen the financial system".


"It emphasized the need to reduce economic and financial risks, including the reliance on new deposit inflows to cover large fiscal and external deficits," the spokesperson said. "It also pointed to significant resources that would be needed to ensure banks remained capitalized in the event of a severe shock."


When foreign exchange inflows dried up in 2019, the banks, many of them with leading politicians as shareholders, shut depositors out of their accounts. Withdrawals have since been limited, mostly made in Lebanese pounds which have lost 90 per cent of their value.

By 2020 the central bank deficit had grown to $50 billion with total bank losses to $83 billion, according to a rescue plan prepared by the finance ministry in April that year. Both the central bank and the banking association dispute these figures but have not publicly given alternatives.


A forensic audit of the central bank is a condition for Lebanon to secure an urgent IMF rescue package.

The audit resumed last week after an almost year-long hiatus due to disagreements over access to information.


The crisis, described by the World Bank as one of the deepest depressions in modern history, has propelled 74 percent of the population into poverty, according to the United Nations.


"The social impact, which is already dire, could become catastrophic," the World Bank said in April. Even during Lebanon's 1975-1990 civil war, the banks remained solvent and functional.


Salameh has repeatedly said he was acting only to buy time for Lebanese politicians to agree reforms to cut the budget deficit and that it was not his fault that they failed to do so.


Asked if the IMF had a duty to be more proactive in pushing for the $4.7 billion negative net reserves figure to be published, the IMF spokesperson referred Reuters to the fund's transparency rules.


These say that a country may ask for non-public material to be removed from a report if it is: "Highly market-sensitive material, mainly the Fund's views on the outlook for exchange rates, interest rates, the financial sector, and assessments of sovereign liquidity and solvency."


The IMF spokesman declined to say whether Lebanon specifically made this request and also did not address whether there is a formal limit on the size of net reserves.


Earlier this year, Swiss authorities launched an investigation into "aggravated money laundering in connection with possible embezzlement to the detriment of the Banque du Liban (central bank)".

Salameh has denied any wrongdoing and said the investigation is part of a campaign against him.


Swiss newspaper Le Temps first reported earlier this month that key information had been kept out of the public eye by the central bank in 2015. The central bank had said the report "had nothing to do with the truth".


MENA Project Tracker— ACWA bids on PPP projects; Kahramaa EOI on new project; Iraq requests bids on water dam

MENA Project Tracker— ACWA bids on PPP projects; Kahramaa EOI on new project; Iraq requests bids on water dam
Updated 13 sec ago

MENA Project Tracker— ACWA bids on PPP projects; Kahramaa EOI on new project; Iraq requests bids on water dam

MENA Project Tracker— ACWA bids on PPP projects; Kahramaa EOI on new project; Iraq requests bids on water dam

CAIRO: Saudi-based ACWA Power has submitted a bid to develop the Amaala Utilities Public-Private Partnership as part of the Amaala giga-tourism project in Saudi Arabia, reported Zawya.

ACWA Power has been going strong with bids on many projects, such as a solar photovoltaic independent power plant project in Uzbekistan, an independent water plant project in Saudi Arabia, and many more.

While the prolonged war has caused disruptions in the project's progress, ACWA said it is confident that its work will experience only a very minor delay.   

Kahramaa EOI on new project

Kahramaa— Qatar state utility General Electricity & Water Corporation—has received expressions of interest from developers for the planned Facility E independent water and power producer project.

While two consortiums and two other companies withdrew their EOI, Japan-based Marubeni Corp. has committed to its bid.

Moreover, Kahramaa is considering swapping out the original project for an independent water project instead, according to MEED.

Iraq requests bids on water dam

Iraq's Water Resources Ministry has requested bids from three companies— Serbian-based Energoprojekt, Italy’s Hydronova, and the Dutch Deltares Co.—for the construction of its $3.7 million water dam on the Southern Shatt Al-Arab River.

“The Ministry asked those companies to submit their bids for the first phase of the project before September 25,” according to Zawya.

 


NRG Matters — Share of renewables in Jordan’s energy mix jumps; India’s clean power industry may miss annual target

NRG Matters — Share of renewables in Jordan’s energy mix jumps; India’s clean power industry may miss annual target
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NRG Matters — Share of renewables in Jordan’s energy mix jumps; India’s clean power industry may miss annual target

NRG Matters — Share of renewables in Jordan’s energy mix jumps; India’s clean power industry may miss annual target

RIYADH: Jordan recorded a 3 percent hike in renewable energy’s share of its total energy mix since the beginning of 2022.

According to Jordan’s Minister of Energy and Mineral Resources, Saleh Al-Kharabsheh, renewable energy sources contributed 29 percent to the total power generation in the country up from 26 percent during the same period last year.

Al-Kharabsheh said the total installed capacity of electric power generation projects from renewable energy sources reached about 2,526 MW until the end of July 2022. 

India’s renewable energy target 

India will miss its renewable energy target for the end of the year, with experts saying “multiple challenges,” including a lack of financial help and taxes on imported components are stalling the clean energy industry.

The country has installed just over half of its planned renewable energy capacity, a high level parliamentary report found last week, according to AP News. 

Enlight’s JV

The publicly traded company, Enlight is planning to create a joint venture with Israeli natural gas producer, NewMed, to develop renewable energy projects in North Africa and the Middle East, Bloomberg reported. 

“The venture will exploit what we see as a very large opportunity in the region that began with natural gas, a development led to a large extent by NewMed,” Enlight CEO Gilad Yavetz told Bloomberg. 

The venture targets the region’s markets namely Saudi Arabia, Morocco, the UAE, Bahrain, Oman, Korean and Egypt. 

New Zealand’s Contact Energy

New Zealand's Contact Energy said it would spend $300 million New Zealand dollar ($193.29 million) to build a 51.4 MW geothermal power unit near its Te Huka power station in Taupo.

The investment would help bolster the firm’s renewable power generation amid high demand, according to Reuters. 


TASI rises as investors await earnings, assess rising inflation: Closing bell

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Updated 43 min 18 sec ago

TASI rises as investors await earnings, assess rising inflation: Closing bell

TASI rises as investors await earnings, assess rising inflation: Closing bell

RIYADH: Saudi stocks ended Monday’s session higher, as investors awaited more earnings reports while trying to assess the impact of rising inflation.

The Tadawul All Share Index edged up 0.23 percent to finish at 12,543, while the parallel market, Nomu, gained 0.31 percent to end at 22,110.

Wafrah for Industry and Development Co. soared 5.09 percent, after the company swung to a profit of SR11 million ($2.92 million) during the first half of 2022.

Arabian Internet and Telecommunication Co., known as solutions by stc, increased 1.55 percent, following the Saudi competition authority’s approval of Egypt’s Giza Systems’ acquisition.

Saudi Tadawul Group Holding Co. added 0.75 percent, despite the announcement of a 23 percent decline in profits during the first half of the year to SR278 million.

Saudi Aramco closed flat, after it achieved its highest quarterly profit since going public in 2019 with SR182 billion ($48.4 billion), a 90 percent jump over analysts’ expectations.

Saudi jeweler L’azurde fell 2.15 percent, despite reporting a 22 percent profit rise in the first half of 2022 to SR22.2 million

Basic Chemical Industries Co. lost 2.19 percent, despite achieving a 63 percent profit increase to SR46 million for the first half.

Red Sea International Co. declined 0.14 percent to lead the gainers, after the real estate firm announced that its accumulated losses have been cut to zero, following a reduction in the company’s capital by SR298 million.

Saudi Printing and Packaging Co. fell 2.25 percent, after the company narrowed its losses by 91.8 percent to SR2 million during the first half.

Arabian Shield Cooperative Insurance Co. slipped 0.64 percent, after posting a 30 percent profit decline to SR16 million for the first half.


Increasing demand for NEOM project fuels recovery of Tabuk Cement: CEO

Increasing demand for NEOM project fuels recovery of Tabuk Cement: CEO
Updated 20 min 33 sec ago

Increasing demand for NEOM project fuels recovery of Tabuk Cement: CEO

Increasing demand for NEOM project fuels recovery of Tabuk Cement: CEO

RIYADH: Increasing cement demand from giga-projects such as NEOM has helped Tabuk Cement swing into profit in the second quarter of 2022 despite a trend of the dismal performance of the Kingdom's cement sector.

The strategic location of Tabuk Cement made it a reliable supplier for the NEOM project, which in turn benefited the company, the firm’s CEO told Al-Arabiya.

Tabuk Cement is set to thrive, thanks to high demand from Saudi’s Red Sea, Amaala, and NEOM projects, which will boost the cement industry, Ali Al-Qahtani said.

The cement producer swung to a profit of SR2.5 million ($665,712) during the second quarter of the year, compared with a loss of SR1.13 million in the same period last year. Revenues jumped 51 percent during the period.


Saudi-based Nama Ventures leads a seed funding round for Bahraini startup Faceki

Saudi-based Nama Ventures leads a seed funding round for Bahraini startup Faceki
Updated 15 August 2022

Saudi-based Nama Ventures leads a seed funding round for Bahraini startup Faceki

Saudi-based Nama Ventures leads a seed funding round for Bahraini startup Faceki

RIYADH: Saudi-based venture capital firm, Nama Ventures, led a seed funding round for an undisclosed amount for Bahrain-based award-winning fraud protection and identity verification platform, Faceki.

“We plan to expand our global footprint, and continue innovating and provide compliant, secure, and user-friendly identity verification solutions,” Hamza Al-Ghatam, co-founder and CEO of Faceki, said in a statement.

The round also saw participation from venture capital firm Vision Ventures along with other angel investors.

Founded in 2020, the platform uses cloud biometrics and digital identity verification solutions powered by machine learning to serve its customer base in over 175 countries.