Lebanon’s Riad Salama says currency is stable

Lebanon's Central Bank Governor said that he would seek to contain the expected 7 per cent inflation rate in 2011. Quoted by the national news agency, Riad Salama said "The Bank of Lebanon plans to reduce inflation in order to achieve high growth rates in the economy."

Lebanon has managed to keep inflation below 5 per cent in 2010, but Salama predicted that inflation this year would reach up to 7 per cent. He added that the Central Bank intends to curb it through managing liquidity rather than raising interest rates. Annualised consumer price inflation reached 5.8 per cent in February.

The Lebanese economy is expected to grow at 2.5 per cent in 2011, down from a previous forecasts at about 5 per cent due to political disagreements that delayed the formation putting its toll on the economy. "The financial market is currently balanced and our aim to maintain stability in the lira exchange rate."Salama said

He also attributed the surge in inflation to the rise in global oil and food prices; not bad central banking practices. However, he explained that "the rate of inflation in Lebanon remains less than that in countries such as Turkey and Brazil."

In the same context, The United States has put more than 100 individuals and entities affiliated with Hezbollah onto sanctions lists since 2001, under existing anti-terrorism funding legislation. Today, Lebanon’s central bank governor stated that Lebanese banks ought to comply with a new U.S. law targeting Shi’ite group Hezbollah’s finances.

Noting that the U.S. Hezbollah International Financing Prevention Act (HIFPA) passed in December threatens sanctions against anyone who finances Hezbollah in a significant way.
Governor Riad Salameh said there is a huge risk, shall they fail to comply with the law, of an international isolation of the country’s banking sector to take place.

The latter added that banks must comply with the law, however no accounts will be closed without justification, and assured citizens that laws protect them from having bank accounts arbitrarily blocked or shut downm.

Thus, Banks which intend to close accounts of individuals or organizations considered to be in breach of the U.S. law must provide justification for that decision, and wait for a response from the Central Bank’s Special Investigation Committee, which “enjoys independence”, he said.

The United States has a list of people sanctioned for terrorism. A Lebanese bank or company doing business with anybody on the list will not be able to deal with any U.S. financial institution because that institution could be fined for non-compliance.