Lebanon appoints new central bank governor as it works to climb out of economic crisis
This is a locator map for Lebanon with its capital, Beirut. (AP Photo)
BEIRUT (AP) — Lebanon appointed asset manager Karim Souaid to the post of central bank governor Thursday as the government tries to reform the economy after months of war and decades of mismanagement and corruption.
The country’s economy has been in crisis for five years and desperately needs reforms to unlock international aid, and on top of that, Israel’s 14-month war with Hezbollah caused what the World Bank estimates was $11 billion in damages and economic losses.
The appointment was announced by Prime Minister Nawaf Salam, the International Court of Justice jurist who was named Lebanon’s premier in January following the election of President Joseph Aoun earlier that month.
Salam said that Souaid was chosen by more than two-thirds of the 24 members of Lebanon’s reformist Cabinet, though the prime minister said he himself did not support the decision. “The Lebanese have asked us for reforms and we insist on reforms,” Salam told reporters after the government meeting.
Souaid, an asset manager who previously was a senior executive at HSBC bank, is seen by critics as being sympathetic to the stance on economic reform taken by the country’s banks, and fear he might sell what’s left of Lebanon’s state assets to bail them out.
An unproductive economy and decades of corruption by Lebanon’s political and financial leaders that drained state resources eventually led to a run on the banks in 2019. Covid-19, the massive Beirut Port blast in August 2020 and the monthlong Israel-Hezbollah war furthered compounded the country’s economic woes.
Lebanon has been running on a cash economy, with most of its electricity coming from private suppliers, leading to inflation and pulling almost half the population into poverty, according to the World Bank.
The country has struggled to reach an International Monetary Fund-approved deal to unlock aid to make the economy viable again, with the international financial institution asking Lebanon to end waste, crack down on corruption and financial crimes, and restructure its banking sector.
Lebanon’s commercial banks have been hesitant to implement some of these reforms, as it would burden them with the country’s tens of billions of dollars in economic losses, experts and activists say. The banks believe the state should carry most of that burden, blaming them for defaulting on paying back the state’s massive debt in 2020 and for its wasteful spending.
Souaid had the backing of President Aoun, while Salam and a handful of ministers have remained skeptical of him.
“Karim Souaid was not my candidate and I abstained with some ministers because of my concerns regarding the rights of depositors,” Salam told reporters after the Cabinet meeting, referring to concerns that large amounts of bank deposits might not be given back to depositors. “He will have to abide by the financial policy of our reformist Cabinet.”
Souaid succeeds Riad Salameh, the embattled former governor of 30 years whose term ended with several international corruption cases lodged against him and for embezzlement and other financial crimes. Salameh was appointed in 1993, when Lebanon was scrambling to bounce back after a 15-year civil war.
Salameh, who is currently in detention, was heralded as a financial genius for preventing hyperinflation and keeping the Lebanese currency stable through years of political tensions and conflict, and then left his post widely perceived as a key architect of the country’s financial downfall.