Diab’s plan also included a forensic examination of the central bank, the Banque du Liban, which, among other things, is tasked with ensuring the country’s monetary and economic stability. Riad Salameh, governor of the bank since 1993, enjoyed worldwide recognition, among other things for its so-called financial engineering. Basically it worked like this: commercial banks offered double-digit interest rates on new time deposits and then lent that money to the central bank, which then lent it to the state. The agreement, which even French President Emmanuel Macron called the âPonzi schemeâ, was based on banks sucking in new money. The share of the banks in the national debt was more than 40 percent. From 1993, when Salameh took up his position, through 2018, banks’ net income rose 3,000 percent to $ 2 billion.
The high interest on bank deposits encouraged a rentier economy that hampered investment in industry and agriculture. Hala Bejjani, the former executive director of Kulluna Irada, a civil society organization dedicated to political reform, told me that the signs of Lebanon‘s financial decline are “obvious” but that the leaders did not want to see them. She and a team of development specialists, economists and financial experts met with high-ranking politicians, including the president, in March 2020 to warn of an impending financial implosion and suggest ways to avert it. âIt’s a recipe like baking a cake,â Bejjani said of the plans. âThey were all absolutely shocked by what we told them,â said Bejjani, âbecause that is the job of Riad Salameh. They were all focused on their fiefdoms. “
“If you still believe that you can trust the same warlords to accept new aid to solve the problems, you are delusional.”
Salameh has refused to answer many of the questions posed by the foreign accounting firm Alvarez & Marsal, selected by Diab’s cabinet, citing a 1956 banking secrecy law. Najm, the former Justice Minister and one of the strongest proponents of forensic testing, railed against Salameh’s claims that public funds are subject to banking secrecy, which had to be lifted for a year before an investigation could continue. “It’s not necessary, and it’s a dangerous precedent,” she said, “because it gives the impression that you can’t do an audit without repealing the law every time.” Attieh, who attended cabinet meetings on forensic testing , urged that not only the central bank but all of the state’s ministries be examined, a recommendation that was not accepted.
Salameh is currently being investigated by the Swiss and French authorities for accumulating hundreds of millions of dollars, allegedly through embezzlement and money laundering. He denies any wrongdoing. The French president said Lebanon’s ruling class used its ties to banks to move funds overseas during the financial crisis. Many Lebanese, including Michel Wollen, an entrepreneur and first-time MP who tried to introduce a capital control law in 2019 but failed, want the international community to disclose the foreign bank accounts of Lebanese politicians. “When the people are starving and their leaders have billions of dollars overseas selling them slogans,” Hence said, “the people will turn against them.”
A new Lebanese government Formed under the direction of Najib Mikati in September and resumed central bank forensic scrutiny and talks with the IMF in October because of Hezbollah’s powerful role within the state and its strong ties to its regional archenemy, Iran. The West has also said that aid depends on reforms and anti-corruption measures, a condition it has made and ignored in the past.
For people like Kobaissi it is clear that Western nations in Lebanon “are liars when they say they want to fight corruption”. If they were serious, he told me, “they would support accountability and regulators.” According to the Gherbal Initiative, a civil society organization founded in 2018 that studies government contracts, foreign loans, and grants, overseas states have often poured money into hazy plans that never materialize. Assaad Thebian, the 33-year-old executive director of Gherbal, gave me a case in point: Several foreign loans over the years totaling about $ 200 million for the same sewage project that never went ahead. “If you still believe that you can trust the same warlords to accept new aid to solve the problems, you are delusional,” he said.