Lebanon's central bank faces uncertainty without appointment of new
governor
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[July 28, 2023]
By Maya Gebeily
BEIRUT (Reuters) - Lebanon's central bank faces leadership uncertainty
from Monday when the governor steps down with no appointed successor,
risking new dysfunction in a state already hollowed out by years of
political paralysis and financial collapse.
Riad Salameh leaves office after 30 years in the post, his reputation
tarnished by the catastrophic financial collapse that began in 2019 and
charges of corruption in France, Germany and Lebanon. He denies any
wrongdoing.
The leadership crisis reflects divisions among the ruling elite that has
been unable to install a president or fully empowered cabinet for over a
year, while leaving the financial crisis to fester, largely unaddressed,
since 2019.
The cabinet was meant to meet on Thursday to choose Salameh's successor,
but it was cancelled following political disputes and there is little
sign of a long-term solution on the horizon.
Under Lebanese law, that means the most senior of Salameh's deputies,
Wassim Mansouri, is to replace him in the interim. But he - and the
other three deputy governors - will only do so reluctantly and they are
pushing for policy guarantees.
The bank's new leaders will have to grapple with a more-than $70 billion
hole in the financial system, uncertain political support in a deeply
fragmented state and seething public anger at the evaporation of
national and private wealth.
For Lebanon, it means another key post will officially sit empty,
hostage to the breakdown in Lebanon's sectarian power-sharing politics
that has already driven chaos in most functions of the state.
POLITICAL PRESSURE
Caretaker prime minister Najib Mikati and parliament speaker Nabih Berri
tried to forge an agreement this week after months without any progress
towards finding Salameh's successor.
But the armed Shi'ite Muslim party Hezbollah and its Christian ally the
Free Patriotic Movement, which are both part of the governing coalition,
have rejected the moves, saying a caretaker cabinet lacks authority to
make the appointment.
Thursday's cabinet meeting was abruptly cancelled when ministers
affiliated to those parties did not turn up.
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Lebanese Central Bank Governor Riad
Salameh speaks during a news conference at Central Bank in Beirut,
Lebanon, November 11, 2019. REUTERS/Mohamed Azakir/File Photo
The governor's post, like the vacant presidency, is reserved for a
Maronite Christian and the FPM has accused Mikati of trying to usurp
the powers of the president by pushing through an appointment.
Mansouri and the other three deputy governors last month threatened
to quit if forced to take over. They want powers to lend more money
to the government if needed and to phase out a complex exchange
platform for the much-devalued pound.
Mikati met the deputy governors on Thursday and his office said he
viewed their demands as legitimate and their proposals as consistent
with his government's plan in an apparent effort to keep them in
place.
But it is not clear if Mikati could implement such changes, given
Lebanon's political standoff. Mansouri declined to comment, but
another of the deputies, Salim Chahine, said he expected Mansouri to
be running the bank from next week.
He told Reuters the deputy governors were giving the political class
six months to institute meaningful reforms, but he would not say if
they would reinstate their threat to resign if no changes were
enacted.
"Our condition is that you complete the required reforms, starting
with a capital controls law that is very fast," he said.
Mike Azar, an expert on Lebanon's financial crisis, said the deputy
governors were caught in a bind.
"The question is, will they do the right thing and act independently
as the law allows them, even in the face of what will surely be
fierce political pressure," he said.
(Reporting by Maya Gebeily and Laila Bassam; Writing by Angus
McDowall; Editing by Toby Chopra)
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