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Beirut damage is in the 'billions,' Lebanese central bank to offer interest-free loans for destroyed property

Key Points
  • The bank will approve interest-free loans for five years to individuals and companies who had property destroyed, a central bank official told CNBC's Hadley Gamble.
  • Years of excessive dollar selling by the central bank to prop up the national currency along with myriad other financial mismanagement and soaring foreign debt has left the country practically devoid of dollars. 
  • Prior to the blast, Lebanon was already mired in the worst financial crisis in its history.
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Rescue operations in Beirut continue after two large explosions decimate city

The destruction wreaked on Lebanon's capital in the Beirut port explosion Tuesday that killed more than 135 people and displaced some 300,00 is in the "billions" of dollars, the country's central bank said Wednesday.

The bank will approve interest-free loans for five years to individuals and companies who had property destroyed, a central bank official told CNBC's Hadley Gamble. It will also sell dollars to all importers of aluminum, wood or glass at the rate of 3,900 Lebanese pounds per dollar, well below the black market rate of more than 8,000 pounds to the dollar. 

Lebanon is currently facing the worst financial crisis in its history, and this was the case before both the blast and the coronavirus pandemic. The country's currency remains officially pegged to the dollar — but it's an artificial peg, fixed at 1507.5 Lebanese pounds per dollar since 1997. Years of excessive dollar selling by the central bank to prop up the Lebanese pound along with myriad other financial mismanagement and soaring foreign debt have tanked its actual value and left the country practically devoid of dollars, which are crucial for importing goods. 

A man checks the damage in this heavily damaged old Lebanese building in the trendy Beirut neighbourhood of Mar Mikhael on August 6, 2020 in the aftermath of a massive explosion in the Lebanese capital.
Patrick Baz | AFP | Getty Images

The country was already struggling to import food and basic goods — and imports make up 80% of its food needs. 

Lebanese banks have placed restrictions on withdrawals, leaving residents locked out of their bank accounts, and those who saved in local currency have seen their life savings wiped out. The crisis begs the question of how Lebanon will now rebuild after its ability to import supplies was already in jeopardy. 

Beirut's residents are in shock and mourning after the enormous explosion at the city's port ripped through miles of surrounding homes and businesses and injured more than 4,000 people.  Hospitals are overwhelmed, with some too damaged by the blast to operate.

A before (L) and after satellite image after a massive explosion in Beirut, Lebanon.
Source: Planet Labs

The explosion has been initially blamed on 2,750 tons of ammonium nitrate stored in an unsecured warehouse for the last six years at Beirut's cargo port. But the government subsequently announced an investigation to determine within five days the exact cause of the explosion and "who was responsible."

Lebanon's cabinet said Wednesday that all port officials who oversaw storage and guarding since 2014 have been put under house arrest, Reuters reported citing ministerial sources. 

Numerous countries have offered to come to Lebanon's aid, including France, the U.S., the U.K., the UAE, Qatar, Iran, Jordan, Kuwait, and more unexpectedly, Israel — with whom Lebanon has no diplomatic relations.

—CNBC's Hadley Gamble contributed to this article.