Lebanon fails to find successor to central bank chief as term ends

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Lebanon’s veteran central bank governor leaves office on Monday after 30 years on the job with two international arrest warrants to his name and no designated successor.

Riad Salameh, 73, who was appointed governor of the Banque du Liban in 1993, was for years credited with stabilising a battered economy after a 15-year civil war. He outlasted 12 premiers and was once seen as a viable candidate for president.

But Salameh’s reputation is now in tatters, dogged by allegations of corruption and financial mismanagement. The Lebanese pound has lost more than 98 per cent of its value against the dollar since 2019, impoverishing three-quarters of the population.

With hours to go until his mandate ends, there was still no consensus on a permanent successor. Political parties disagree about whether a caretaker government has the power to appoint one, with some political parties not represented in government boycotting discussions.

“I don’t think the issue of appointing a new governor is even on the table anymore,” said deputy prime minister Saade Chami. “Now we’re just hoping for the first deputy governor to take the helm and assume his full responsibility with the support of the other three.”

Deputy governors are set to meet on Monday with representatives of government and parliament to broker an eleventh-hour deal to govern in the interim. They have put forward an ambitious plan that hinges on drastic policy shifts, as well as capital control laws and reforms that political leaders have evaded for nearly four years. Approving these laws in the set timeframe is in doubt. 

“We hope the government and the parliament will approve our proposed reform plan without delay,” one of the deputies, Salim Chahine, told the Financial Times.

According to law, Salameh’s first deputy governor Wassim Mansouri is set to take over. But the deputies have urgently called for a permanent replacement to be named. In the meantime, they have asked for political and legal cover to discontinue Salameh’s costly interventions to stabilise the Lebanese pound.

Critics of Salameh blame him for leading the country to ruin by financing successive governments despite their profligate spending and the unproductive economy, and maintaining an unrealistic fixed exchange rate.

The BdL has been the largest buyer of government debt and Salameh engineered financial programmes to keep the system going when dollar remittances from Lebanon’s large diaspora slowed after 2015.

When crisis hit in 2019, Salameh became the public face of Lebanon’s downward spiral: the currency peg unravelled and Lebanon defaulted on its debt in March 2020. The system he oversaw has been likened to a Ponzi scheme, with the World Bank calling the financial crisis a “deliberate depression orchestrated by the country’s elite that has long captured the state and lived off its economic rents”.

Salameh’s reputation has also been battered by allegations of money laundering and corruption, which emerged in the wake of the economic meltdown. Judicial probes at home and in at least six European countries have examined allegations that he siphoned off hundreds of millions of dollars from the BdL for personal gain.

In May, he was placed under formal investigation by France’s financial prosecutor. An international arrest warrant from both France and Germany, and a corresponding Interpol Red Notice, followed.

Salameh has vigorously denied accusations against him and said his actions benefited the economy. In his last televised interview, which aired on Wednesday, he reiterated that he was being made a scapegoat and said the government, not the BdL, was responsible for spending public money.

Despite the gathering scandal, until recently, many in Lebanon — including Salameh himself — assumed his term would be extended. “He was talking as though [a seventh term] was still a possibility as recently as early July,” said a person in Salameh’s entourage.

For months, Lebanon’s political leaders have had fruitless discussions about his replacement with the caretaker cabinet and Salameh’s four deputy governors scrambling for a solution. On Thursday, a cabinet meeting where a replacement was due to be named was abruptly cancelled.

The foot-dragging is emblematic of the chronic political dysfunction in Lebanon, which has left a caretaker government in place for more than a year. Salameh’s succession is tied to unresolved negotiations over the presidency, which has been vacant since October.