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Lebanon's Interim Central Bank Chief Rejects Government Loans

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Lebanon's Interim Central Bank Chief Rejects Government Loans

Lebanon's interim central bank governor, Wassim Mansouri, has emphasized the urgent need for economic and financial reforms in the country. Mansouri made it clear that the central bank will not provide loans to the state or resort to printing money to cover the substantial budget deficit, as doing so would worsen inflation. The comments come as Lebanon grapples with its worst economic and financial crisis in modern history. The country's political class, blamed for years of corruption and mismanagement, has been resisting the international community's calls for reforms.

The Importance of Reforms

Since assuming office, Mansouri has been urging the government to implement necessary reforms, warning of the increasing losses and the potential collapse of the state if action is not taken promptly. He highlighted that the recently approved 2023 budget carries a 24% deficit, while the central bank had advocated for a deficit-free budget. Mansouri firmly stated that the central bank will not cover the deficit through lending, whether in U.S. dollars or Lebanese pounds, as printing more money would have severe consequences.

Cooperation and Transparency

Mansouri expressed the central bank's willingness to cooperate with Alvarez & Marsal, the New York-based company conducting a forensic audit of Lebanon's central bank. He assured that all necessary documents would be handed over to the international company and Lebanese judicial authorities. The audit has already revealed years of misconduct by Mansouri's predecessor, Riad Salameh, and the existence of $111 million in "illegitimate commissions." In conclusion, Lebanon's interim central bank chief's rejection of government loans underscores the pressing need for economic and financial reforms in the country. The cooperation with the forensic audit and the commitment to transparency are positive steps toward addressing the deep-rooted issues contributing to Lebanon's economic meltdown.

Implications of Lebanon's Central Bank Decision on New Businesses

The decision by Lebanon's interim central bank chief, Wassim Mansouri, to reject government loans is a clear signal of the country's dire economic situation. This decision, coupled with the urgent call for financial reforms, paints a challenging landscape for new businesses in Lebanon. The refusal to print money to cover the budget deficit, while fiscally responsible, could potentially tighten liquidity in the market, making it harder for businesses to secure loans or attract investments.

The Role of Economic Reforms

Mansouri's emphasis on economic reforms underscores the need for systemic changes to stimulate business growth and economic recovery. For new businesses, this could mean potential opportunities if these reforms result in improved business regulations, reduced corruption, and increased market transparency.

Impact of Financial Transparency

The commitment to cooperate with the forensic audit and the promise of financial transparency are positive steps. However, the revelations of past misconduct could further erode investor confidence in the short term. New businesses must navigate this complex environment, balancing the potential opportunities that may arise from economic reforms with the current challenges posed by the economic crisis. In conclusion, while Mansouri's stance may initially seem like a hurdle for new businesses, it could also pave the way for much-needed economic reforms that can foster a more conducive business environment in the long run.
Story First Published at: https://financialpost.com/pmn/business-pmn/lebanons-interim-central-bank-chief-vows-not-to-lend-money-to-government
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