With the term of Riad Salameh, the governor of Banque du Liban, approaching its end this July, mounting interest surrounds the expectations for the post-Salameh era.
His tenure was marred by numerous criticisms of his financial policies, raising concerns about the future of the banking platform and the dollar exchange rate. While the monetary path has been semi-stable for several months, with the dollar price remaining high, uncertainty now abounds as to whether this stability will persist beyond July.
It is evident that any discussions regarding monetary changes or news related to banking and Banque du Liban significantly impact the exchange rate. Recently, the dollar experienced a sharp rise after months of stability, only to return to a decline shortly afterward. This has left some fearing the financial landscape post-July, particularly if there is ambiguity surrounding the status of Banque du Liban, given the numerous accusations and questions surrounding the role of the bank and its leadership in the exchange rate fluctuations.
According to a report by Reuters, Salim Shaheen, one of the deputy governors of Banque du Liban, stated that the Central Bank is in the process of gradually discontinuing the “Sayrafa” platform. He further emphasized that the bank’s leadership is engaged in discussions with Lebanese officials and the International Monetary Fund, highlighting the necessity of moving away from the platform due to its lack of transparency and governance. “It’s about the way Sayrafa will be phased out,” he told Reuters.
Dr. Zakaria Hammoudan, Director of the National Institute for Studies and Statistics, shed light on the reasons and timing behind the proposed suspension of the exchange platform. Speaking to Al-Manar website, he expressed his view that the banking system’s implementation is a misallocation of depositors’ money, leading to significant financial waste in a country already facing bankruptcy. The financial misspending, borne by depositors, has resulted from exchange rate fluctuations, leaving many unwilling to bear the responsibility for this crisis.
When considering post-Riad Salameh’s phase, Dr. Hammoudan believes that the alternative to Salameh will likely be someone similar to him. This suggests that his term might not end until the election of a new president for the republic, indicating a potential preparation for a specific resolution to this matter.
Yesterday, Tuesday, the Parliamentary Administration and Justice Committee held a meeting, which was attended by the governor’s deputies, namely Wassim Mansouri, Bashir Yakzan, Selim Shaheen, and Alexandre Moradian. During the meeting, the four deputies urged for legislative support to initiate actions aimed at addressing the ongoing crisis. They emphasized their intention to halt spending from what they refer to as mandatory precautions, unless the government and the Parliament jointly agree to do so through the enactment of a new law.
This includes the ability to control spending from the mandatory precautions fund, which they believe should be subject to legislative approval through the established democratic process, according to Al-Akhbar newspaper which quoted contradictory statements from both the committee sources and the deputies’ sources.
According to Dr. Hammoudan, the existence of exchange contributes to monetary stability. However, any news or negative developments concerning the exchange rate can lead to instability, with the dollar’s value fluctuating unpredictably. This situation could potentially lead to comprehensive “dollarization,” rendering the lira worthless until financial stability is restored, potentially through a political settlement.
The platform was initially established with the goal of maintaining exchange rate stability, but its implementation revealed several loopholes. Dr. Hammoudan argues to Al-Manar that while the banking system does foster stability, it comes at a high cost in terms of financial waste required to maintain this stability.
The breakdown in governance and political tensions have hamstrung efforts to find a successor to Salameh, whose 30-year tenure has been stained by charges of embezzlement of public funds in Lebanon, which he ‘vehemently’ denies.
In conclusion, as Riad Salameh’s tenure comes to a close, Lebanon faces a critical juncture in its monetary trajectory. The uncertainty surrounding the future of the banking platform, exchange rates, and financial stability make it imperative for the country’s leaders to address these issues promptly and transparently. Only through decisive and responsible actions can Lebanon navigate these challenges and move towards a more sustainable and stable economic future.
Source: Al-Manar Website
