LBCI Obtains Government's Draft Law Allowing Borrowing in Foreign Currency from the Central Bank

The government has prepared the urgent draft law that grants it permission to borrow a specified amount from the central bank for a set duration, subject to effective oversight of the government's relationship with the central bank. This aims to establish transparency regarding government expenditures and the repayment of borrowed funds, whether sourced from increased state revenues or interventions by the central bank in currency markets as per Articles 75 and 83 of the Monetary and Credit Law. The government's borrowing would be contingent upon the approval of reform laws, particularly capital controls, financial stability restoration, bank restructuring, and budget approval, and the proposal is to be submitted to the Parliament for approval.

LBCI has obtained a draft of the government's proposed law, which aims to authorize the government to borrow in foreign currencies under the following conditions:

-        The loan should be a one-time borrowing with the possibility of renewal for a single time.

 

-        The government must limit its need for funds from the central bank and improve its revenues through enhanced tax collection.

 

-        The government may only use the present loan in cases of necessity, particularly to provide stability for public sector employees and support vulnerable groups, ensuring essential medicine and military and security needs.

 

-        The central bank would intervene in the foreign exchange market to maintain monetary stability.

 

-        The borrowed funds should be repaid within 18 months, using state revenues or the central bank's intervention to buy and sell foreign currencies.

 

-        The central bank reserves the right to suspend the loan if the government fails to adhere to the approved reform laws and its proposed plan.