Lebanon's Central Bank calls for swift action to curb subsidies

BEIRUT: Lebanon's Central Bank called on the country's caretaker government on Wednesday to urgently adopt a plan to limit spending on subsidies to protect remaining foreign currency reserves.

The bank said it had been forced to sell dollars in recent months to prevent inflation, which has already reached 84%, from spiralling as high as 275%, and the remaining reserves needed to be protected.

The comments echoed warnings from caretaker Finance Minister Ghazi Wazni, who said two weeks ago that Lebanon would run out of money to fund basic imports by the end of May and delays in reducing subsidies were costing $500 million a month.

Foreign currency reserves stand at around $15.8 billion, Wazni said. That meant, at best, two months of subsidies left before hitting obligatory reserves -- hard currency deposits parked by local lenders at the central bank -- which he estimated at $15 billion.

The Central Bank said the government should act quickly because of "the danger of the situation and the economic and social impact of any delay."

A financial meltdown, which has seen the currency lose up to 90% of its value, is fuelling hunger and unrest in the country's gravest crisis since its 1975-1990 civil war.

The government's plan aims to halve the $6 billion in annual spending on subsidies, but will need parliamentary approval and could take some time.

Politicians have yet to agree an economic rescue plan or a new government since the outgoing administration quit in August over the massive Beirut port explosion that killed 200 people.