Al-Shami told local media: "Both the state and the Lebanese central bank are bankrupt, the losses have been incurred and we will try to reduce the losses for the people."
He said that the losses caused by the bankruptcy will be shared by the central and local governments and the Lebanese central bank, and neither party has any objection to the distribution of responsibilities for the losses.
Lebanon's central bank governor Riad Salameh on Monday denied that the institution he headed for 30 years was bankrupt and said it was still fulfilling its statutory duties despite losses in the financial sector.
The governor's comments in a statement were apparently in response to the deputy prime minister, who said on Sunday that both the state and the central bank were bankrupt.
"The news of the bankruptcy of the central bank is not true," Salameh's statement said. It added that the bank was still carrying out its statutory duties under Article 70 of the Money and Credit Law, which stipulates that the bank is entrusted with the maintenance of Lebanon's monetary integrity and maintaining economic stability.
Salameh said: “Despite the losses in the Lebanese financial sector, which the Lebanese government is currently working on with the International Monetary Fund to develop an economic recovery plan to deal with these losses, the Lebanese Central Bank has a role and will continue to do so.”
Lebanon has been grappling with a severe economic crisis since late 2019, including a sharp currency devaluation and shortages of fuel and medical care.
Lebanon's currency has lost 90 percent of its value, reducing people's ability to access basic goods, including food, water, health care and education, and is experiencing power outages due to fuel shortages.
Al-Shami said the situation in Lebanon cannot be ignored, so bank withdrawals cannot be open to everyone. Due to the ongoing economic crisis, foreign currency cash withdrawals in Lebanon have been severely restricted since 2019.
According to the relevant regulations, "bankruptcy" means that the government is unable to pay debts and interest as they come due. Among them, one of the reasons for the bankruptcy of a country is a lack of liquidity, when a country is temporarily unable to repay its debts and pay interest due to its inability to liquidate its asset base quickly, it may declare “bankruptcy”. However, members of the Lebanese Economic and Social Council said in an interview: "Although Lebanon has [really] faltered in repaying its debts, it is not yet a bankrupt country".
Regarding the current social and economic situation in Lebanon, some buyers' production and business activities are affected by social unrest in the country and the shortage of domestic dollars, resulting in payment arrears. Coupled with the current Russian-Ukrainian conflict and the global epidemic, the tourism industry, which is Lebanon's main source of foreign exchange income, has been further affected.
It is expected that business risks will further increase as the multiple political and economic situations in Lebanon continue to deteriorate. Especially in the current situation where Lebanon's exchange rate has plummeted, the local currency has depreciated, and the economy is facing high risks, importers are likely to use this loophole to damage the interests of suppliers due to cost pressures. Good risk control, beware of risks such as abandonment and non-payment by buyers at the destination port, so as to avoid losses caused by the loss of money and goods.
