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The Central Bank of Lebanon, an opaque and untouchable “State within the State”

Lebanon’s international donors are calling for it. The President of the Republic, Michel Aoun, makes it a personal matter. The government of Hassan Diab, which launched this project in March, continues to support him even though he has resigned since the explosion in the port of Beirut on August 4. However, in one of these institutional dysfunctions of which the country of the Cedar has the specialty, the forensic audit of the Central Bank of Lebanon (BDL), a key element of the economic rescue of the country, may never see the light of day.

Friday, November 20, the cabinet mandated by the Lebanese Ministry of Finance to carry out this mission – the American firm Alvarez & Marsal – threw in the towel, after the BDL refused to open its accounts, arguing secrecy banking. Its governor, the irremovable Riad Salamé, in office for twenty-seven years, resists tooth and nail to this operation, intended to shed light on the bankruptcy of the country’s banking sector, whose losses are estimated at 68 billion dollars ( 57 billion euros).

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The Central Bank of Lebanon, an opaque and untouchable “State within the State”

“It’s a slap in the face for the Lebanese state, indignant Marie-Claude Najm, the Minister of Justice, who like her counterparts continues to deal with current affairs, while Saad Hariri, the successor of Hassan Diab appointed at the end of October, has formed his team. The BDL has turned into a state within a state, which refuses to be accountable, continues the minister. This sends a very bad signal, that of an institution that has something to hide. “

It’s an understatement to say that there is an emergency, however. The liquidity crisis that erupted in late summer 2019 led to a collapse of the national currency and a spiraling rise in the price of basic commodities. The share of the population living below the poverty line has increased from 30% in 2019 to 55% today.

Unorthodox practices

Like France, the Western and Arab states which have continued to bail out Lebanon for the past twenty years refuse to take out their checkbook until the country has signed an agreement with the International Monetary Fund (IMF) . And the latter, with which the government had negotiated unsuccessfully in the spring, requires a series of reforms, including the audit of the BDL.

This is divided into three parts: a purely accounting part, entrusted to the firm KPMG, which aims to know the exact balance sheet of the BDL; a “compliance” section, attributed to the firm Oliver Wyman, to verify that the practices of the monetary institution do not derogate from the standards of central banks; and a forensic accounting component therefore, to detect possible embezzlement.

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