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bankingJanuary 12, 2021

The lira will be floated pending program with IMF

The Governor of the Central Bank (BDL), Riad Salameh, predicted that the peg of the lira to the dollar will be over once an agreement with the International Monetary Fund (IMF) for a restructuring program is reached.

The exchange rate will be determined by the market.

This is the first time that abandoning the peg has been raised by the head of BDL. In interviews with France 24 and Reuters, Salameh said that floating the lira needs to take place in conjunction with many other reforms. He said that reforms should include reducing the budget deficit and negotiations with the holders of Eurobonds which the government had defaulted on last year. “Reassuring markets with confidence and fresh liquidity are necessary,” he said.

“The departure from the peg to a floating system should come within a general program enhancing confidence and under the agreement with the IMF,” he said.

Asked whether the currency price would be determined by the market - after remarks made in an interview with France24 where he said the era of the dollar peg was finished - Salameh said the matter was dependent on negotiations with the IMF.

He said that the financial crisis could deteriorate further if a government is not formed quickly.