IMF Memo: 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

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Three people with knowledge of the matter said Salameh himself had insisted to IMF officials that the figure not be published by the IMF on the grounds it would destabilize the financial market.

Asked