Lebanon: Central Bank Governor Rejects the Blame, Points Fingers on ‘ State Spenders’

Published April 30th, 2020 - 09:00 GMT
Lebanon: Central Bank Governor Rejects the Blame, Points Fingers on ‘ State Spenders’
Syria accuses Lebanese parliament speaker of corruption. (Shutterstock)
Highlights
Arab, Western concern that Lebanon could slide into further chaos.

Riad Salameh, governor of the Lebanese central bank, on Wednesday defended his record, rejecting criticism that he was to blame for a financial crisis and assured savers there was no need to panic about their deposits.

“The central bank financed the state but was not the one that spent the money. We must know who spent this money. There are constitutional and administrative institutions that have a mission to reveal their spending,” said the Banque du Liban chief.

Salameh added: “We had to conduct the financial engineering to buy Lebanon time as there were promises of reform, but these promises were not translated due to political reasons.”

Salameh was targeted by a political campaign that amounted to a proposal in the cabinet to dismiss him against the backdrop of the financial collapse in Lebanon.

In his first televised speech, he said: “The Banque du Liban did not cost the state a lira but was making profits and transferring them to the state. The bank also contributed to reducing the state debt in the Paris 2 conference, and we used the gold differences in certain stages to reduce the debt.”

Salameh defended his financing of the state based on the Code of Currency and Credit. He said: “The code states that when the government insists, the central bank provides finances. We respect the law.”

He stressed that “there is no concealed information in the Banque du Liban nor unilateral information in spending decisions that the governor of the Banque du Liban can enjoy, and saying otherwise is a slander aimed at misleading the public opinion to strengthen the campaign against the governor.”

Salameh added: “Had the central bank not financed the state, how would it have provided salaries and electric power? We were not the only ones to finance the state — the banking sector, international institutions and Paris conferences also financed it.”

He reassured the Lebanese people that “their deposits are in place and are being used.”

He emphasized that “financing the import of wheat, medicine and fuel will continue, which leads to price stability in the Lebanese people’s interest.”

Salameh said: “We did not and will not let the banks go bankrupt, and this is for the sake of depositors. We have asked them to increase the capital, and all banks have committed and are trying to implement this in a speedy manner.”

The governor added that “there is no need for a haircut (on deposits),” explaining that: “Speaking of it terrifies depositors and delays the reboot of the banking sector.”

The central bank is still providing dollars at the official rate for imports of wheat, medicine and fuel. Salameh said this helped to purchase power.

He said $21 billion remained in usable liquidity.

Salameh’s speech came on the eve of the government’s endorsement of the final reform plan, which it promised since its formation less than three months ago, and in light of an unprecedented attack from Syria on Parliament Speaker Nabih Berri, an ally of Damascus.

The news manager of the official Damascus Radio station, Ahmed Refaat Youssef, wrote on social media: “Berri is one of the lords of the corruption alliance. He is a partner of the political Harirism and its corruption syndrome, which destroyed Lebanon and affected Syria.”

He added: “Anyone who thinks that Berri is part of the resistance alliance is wrong. He is a burden on it despite that Hezbollah Secretary-General Hassan Nasrallah is trying to invest in him and use him as a political facade.”

Economist Kamal Hamdan said: “Without a peaceful transfer of power, the state is destined to collapse.”

He told Arab News: “The prevailing system is responsible for the succession of crises in Lebanon. It has to leave or else the matter will be limited to band-aid solutions when we require a serious solution that is based on reaching a consensus on the size of the black hole, a fair economic and political distribution of losses, and identifying reforms. 

“After doing our homework, we can go to the International Monetary Fund (IMF) and have a peer-to-peer negotiation. I am pessimistic as long as there is no change in the political power. We have to rebuild the country.”

Economist Issam Jurdi told Arab News: “The governor of the central bank should not have financed a bankrupt state. No law forces him to do that except in emergencies and disasters. The state has been bankrupt for 30 years, and he is still providing it with funds. This has led to triple bankruptcy: The state, banks, and the central bank.”

Jurdi said the solution lies in recovering the money that banks have smuggled abroad.

He added: “I believe what is happening is a struggle for the presidency of Lebanon and the governance of the central bank, but no one thinks they can avoid US sanctions.

“What is required are early parliamentary elections and a fair judiciary to be able to hold the corrupt accountable.”

In response to what is happening, the Assistant Secretary-General of the Arab League Hossam Zaki expressed the league’s concern over “the rapid developments on the Lebanese scene and the dangerous escalation on the ground between the protestors and the Lebanese Army, especially in Tripoli.”

Zaki warned of a rapid slide into unbearable consequences. He said: “Our hopes are chiefly in the wisdom of the army and the security forces, who we believe will act with the usual professionalism and responsibility to prevent the country from slipping into the unknown.

“The Lebanese government is urged to quickly take practical and speedy steps for economic reform and to meet the legitimate demands of the Lebanese people.”

US Assistant Secretary for Near Eastern Affairs David Schenker urged Lebanon to “prove its commitment to reform in order to secure international assistance.” He told Al-Arabiya TV channel: “An accumulation of bad financial decisions, inaction and entrenched corruption and cronyism were the cause of Lebanon’s crisis.”

Washington’s Ambassador to Lebanon Dorothy Shea expressed her dissatisfaction with the non-peaceful nature of the protesters, who have justified demands. She reiterated the necessity of cooperating with the IMF.

Finance Minister Ghazi Wazni received a phone call from French Minister of the Economy and Finance Bruno Le Maire, who affirmed “France’s support for Lebanon in its financial and economic plan.” He stressed “the need to implement the required reform steps.”

Prime Minister Hassan Diab received a call from French Foreign Minister Jean-Yves Le Drian, who expressed France’s support for the government’s reform plan and its willingness to help Lebanon with the IMF.

Le Drian said that France intends to hold a meeting of the International Support Group for Lebanon (ISG) as soon as the coronavirus curfew measures end.

British Ambassador to Lebanon Chris Rampling said after meeting with President Michel Aoun that the current circumstance necessitates the cooperation of all political forces to achieve Lebanon’s supreme interest.


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