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Lebanon economy

Lebanon’s central bank audit is a mere smoke screen

Makram Rabah

Published: Updated:

With nearly $94 billion in debt, Lebanon’s road to recovery is strewn with roadblocks that may be insurmountable. Now, escaping potential widespread hunger and further hardship has become a priority for Lebanese.

The many challenges that face Lebanon’s archaic state include a checklist of governance and financial reforms, where upon completion Beirut can appeal to the international community in general and the International Monetary Fund (IMF) in particular for a $10 billion bailout, something which seems very unlikely to occur in the near future.

Perhaps one of the main demands from the Lebanese public, as well as from the international community, is for an immediate in-depth forensic audit of the central bank to find the culprits, mainly the political elite, who used Lebanon’s money to bankroll their clientelist networks.

Consequently back in April, Prime Minister Hassan Diab’s cabinet approved the forensic audit as part of its economic recovery plan and to win points with the IMF, which is fixated on figuring out the depth of Lebanon’s net reserves – something that central bank Governor Riad Salameh has failed to fully disclose, and instead artificially inflated the numbers over the past few years.

Yet, to this day, Alvarez & Marsal, the multi-national company tasked with carrying out the audit has been unable to do so because the Lebanese state in conjunction with the central bank have repeatedly refrained from providing key data and documents crucial for the audit, claiming that Lebanon’s banking secrecy laws preclude that.

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Thus Alvarez & Marsal announced it was withdrawing from the contract, prompting the Lebanese President Michel Aoun to send a letter to the Parliament urging them to “cooperate with the executive authority to enable the state to conduct a forensic audit of [the central bank’s] accounts.” The Parliament obliged and issued a folkloric non-binding recommendation to adopt Aoun’s request; conveniently this was a few days before the United Nations and France convened a virtual aid conference.

The Lebanese state’s tactics to force Salameh’s hand, allowing the state to emerge as apparent crusading reformers is nothing but a smoke screen where no one involved – primarily Hezbollah and their main Maronite ally Gebran Bassil – truly care about carrying out any real reform.

They simply seek to externalize blame for Lebanon’s current political and economic Armageddon, and to direct the sole blame on Salameh for years of running a glorified Ponzi scheme.

An anti-government protester shouts slogans while wearing a mask with the colors of the Lebanese flag in Beirut, Lebanon, Thursday, July 2, 2020. (AP)
An anti-government protester shouts slogans while wearing a mask with the colors of the Lebanese flag in Beirut, Lebanon, Thursday, July 2, 2020. (AP)

Behind the push for the forensic audit is the hope that Salameh will be forced to release the $17.9 billion in obligatory foreign exchange reserves to be used to keep subsidizing food, medicine, fuel and an array of what is deemed as essential to keep the Lebanese masses at bay. Right now, only $800 million remains for essential subsidies.

This whole standoff, however, is a farce. Both sides are guilty of running the country’s economy into the ground and continually deceiving the general public by turning the whole episode into a technical economic issue while in fact it is political. The political establishment and Salameh are creating a smoke screen to distract from the fact the over $120 billion worth of Lebanese public bank deposits have virtually disappeared.

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Coincidently, both the Lebanese and the international community should remember that to continue to subsidize the Lebanese economy under the current circumstances is nothing short of suicidal, especially given that most of these commodities are sold on the black market and some are ultimately smuggled to Syria. More importantly if this subsidization process is not swiftly redirected to target the less privileged, the obligatory reserves – and any bail out money coming – will simply not be enough.

While Salameh might be the last line of financial defense against Hezbollah and the rest of their allies who wish to replace him with a puppet governor, Salameh must not be allowed to pass for a champion. He should be held accountable for years of financial genocide.

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The international community has time and again rebuked the Lebanese political class for their maliciousness and lack of foresight, yet they still come back with demands of reform in exchange for aid and loans, which is an equally malicious act by the so-called friends of Lebanon.

Lebanon will not escape its dark fate or impending widespread hunger by begging for more funds and accumulating debts. Salvation will only come once state sovereignty and the Lebanese judiciary are restored, only then Lebanon can carry out its own forensic audit and ultimately land anyone who is corrupt in jail, and ending this never-ending nightmare.

Disclaimer: Views expressed by writers in this section are their own and do not reflect Al Arabiya English's point-of-view.