In the midst of a financial storm and accusations of corruption, the governor of the Central Bank of Lebanon, Riad Salameh, decided not to renew his position after three decades in power. The country’s economic crisis and investigations into possible embezzlement shook the closure of his administration. With no successor, Wassim Mansouri takes over on an interim basis.
This Monday, Riad Salameh, governor of the Central Bank of Lebanon, left his position after 30 years in office, which in its last stretch has been marred by corruption investigations and accusations related to the economic crisis that his country is going through. multiple European countries have opened inquiries for alleged financial crimes related to its management.
The announcement of his departure came in an emotional setting, as tearful employees snapped photos and a band played fanfare music on drums and trumpets as they saw him off the building.
Salameh was widely celebrated in his inception as governor in 1993, just after Lebanon’s 15-year civil war ended. At the time, he was praised for his role in the country’s economic recovery, when reconstruction loans and aid were pouring in.
However, the praises faded over time, and his leadership was criticized for his alleged responsibility in the economic debacle which began in 2019. Financial experts argued that his policies created an illusion of stability, but the Lebanese banking system was plunged into a serious crisis due to questionable financial practices, including a Ponzi scheme, a type of investor fraud.
In addition, the now ex-governor is the subject of investigations in France, Germany, Luxembourg and Lebanon on suspicion of massive embezzlement of Lebanese public funds (for some 330 million dollars) and of having accumulated a rich real estate and financial heritage. Paris and Berlin have, in fact, issued arrest warrants to Interpol, although Beirut does not turn its nationals over to foreign courts.
Salameh has repeatedly denied the allegations, insisting his wealth stems from his previous job as an investment banker at Merrill Lynch, inherited properties and investments. He, too, has criticized the investigation and claims to be part of a media and political campaign to make him a scapegoat.
The great challenge of Wassim Mansouri, temporary successor to Salameh
Salameh’s departure marked the end of an era, with no replacement named. In a Lebanon deprived of a president for nine months and led by a government resigned due to political differences, political leaders have not been able to agree on a successor who, due to the multi-denominational distribution of power in the country, corresponds to a member of the community Maronite Christian.
Temporarily, First Deputy Governor Wassim Mansouri, a Shiite Muslim, takes office, the first of that faith to hold the position. A 51-year-old lawyer with two doctorates, he founded his own law firm before becoming lieutenant governor.
In his new role as interim governor, Mansouri would seek to implement monetary policy changes, including liberalizing the Lebanese pound exchange rate and shutting down the ‘Sayrafa’ exchange. He also urged the government to carry out pending reforms to address the crisis.
Mansouri emphasized that the Central Bank cannot solve the crisis on its own and called for the collaboration of the Government and Parliament. He also requested that political differences be set aside to pass the necessary laws.
The reform plan proposed by the new interim governor was considered crucial to address the crisis, but it faces political obstacles and the lack of approval of the reforms demanded by the International Monetary Fund as part of a bailout plan.
His arrival would represent an opportunity to implement measures that seek to curb the crisis and recover the country’s economy. The role of the interim governor may be crucial in this process, but it would depend on political support and the reforms necessary to achieve it.
“In my opinion, what he is requesting corresponds to the government’s position regarding the reform projects that we have sent to Parliament. He is asking for the approval of legislation that allows the government to borrow from the Central Bank in foreign currency,” he said. Najib Mikati, the lebanese prime minister, at the beginning of a session of the Council of Ministers.
A prolonged economic crisis, a concern of years
The crisis had a devastating impact on the Lebanese economy, pulverizing the local currency and leaving many citizens without savings due to a lack of foreign currency in banks. The country’s economy depended for years on a cash-based system and on income from tourism and remittances from Lebanese abroad.
Now the new Central Bank team would have to contend with a financial deficit of more than $70 billion, political uncertainty in a fragmented state, and public outrage over the loss of national and private wealth.
In addition, the leadership crisis reflects divisions within the ruling elite, which has been unable to appoint a full-fledged president or cabinet for more than a year, leaving the financial crisis to fester with no long-term solution in sight.
Lebanon went through an institutional crisis on several levels, with its government operating in a limited caretaker capacity for a year and without a president for nine months. Salameh’s departure, under accusations of corruption, added a new hole in the country’s already fragile institutions.
Uncertainty about the future and the urgent need for effective reform measures pose a challenge for the country’s leaders.
With Reuters, AP and EFE
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