Beirut: Lebanese Prime Minister Hassan Diab blamed "criminal" currency manipulation for the unraveling of the country's decades-old peg.
Flanked by his entire cabinet during a televised speech on Thursday, Diab criticized what he said were years of neglect and mismanagement on the part of the state, saying his own government - in place since January - was on the path to restoring confidence in Lebanon.
The monetary authority will intervene in the local foreign-exchange market to stabilize the pound, he said. "The central bank governor has made a vow to intervene in the exchange market starting today to protect the Lebanese pound and stem the rise in the price of the dollar," Diab said.
Lebanon has plunged into a full-blown financial crisis since October, when nationwide protests erupted against worsening living conditions and brought down the government of Premier Saad Hariri. The government and its banks were already suffering from a shortage of dollars, leading to a crash of the local currency that's lost nearly 60 per cent of its value.
Diab stood by the decision to default on a $1.2 billion Eurobond in March, saying it saved whatever was left in the country's coffers to manage the spread of the coronavirus.
Less than an hour after the premier's speech, the central bank issued a statement, saying it would take measures to protect the pound and support the import of essential food items.
Lebanon's financial prosecutor has arrested dozens of people, including a central bank director, for manipulating the currency and selling dollars to money changers. The director is accused of selectively selling dollars to exchange bureau managers, who in turn hoarded the foreign currency to push the price up even further.
The premier said he understood very well the suffering of the Lebanese people as a result of the currency crisis and vowed that they will soon see a drop in food prices. Diab also said that his government will cut spending by an additional 4-5 per cent this year after asking ministries to reduce their own expenditure by up to 20 per cent.
The government is in talks with the International Monetary Fund in the hopes of obtaining a $10 billion loan program to exit the crisis and revamp the economy. The negotiations, which officials say have been positive so far, could also unlock donor money of up to $11 billion.