2023-06-09 16:56:32
The story of the Lebanese “Central” ruler…from winning international awards to being prosecuted
It is not easy or fleeting for the winner of dozens of international awards that classify him as one of the best central bank governors in the world as the first source of confidence for the Lebanese and protector of their lira, with a charming charm, to be the first responsible for the financial collapse that the country has been witnessing since 2019 and to be wanted by the French authorities. After the French and German judiciary recently issued international arrest warrants against him, following his absence from his interrogation session in Paris, on charges related to “embezzlement, money laundering, transferring it to accounts abroad, and illegal enrichment.”
The septuagenarian man who has long been portrayed as a “superhero” and the architect of financial policies during the recovery phase of the Lebanese economy after the civil war (1975-1990), who has been the governor of the Banque du Liban for 30 years, i.e. one of the longest-serving central bank governors in the world, has become, for about Two years, the focus of judicial investigations in Lebanon and abroad, without affecting his continuation in his position, in which he ends his fifth term at the end of next July, in light of an internal and external political understanding not to renew him again and the direction of matters for his first deputy, Wassim Mansouri, to assume his duties until Election of a new President of the Republic.
“The ruler by his command!”
It is no secret that the late Prime Minister Rafik Hariri had chosen Salameh as governor of the Banque du Liban in 1993 to be his partner in the process of reviving a country shattered by civil war. And after he succeeded in curbing the collapse of the Lebanese currency and fixing it at the limits of 1,500 pounds per dollar, with a clear political decision that was ratified with every ministerial statement, he imposed himself as the “ruler by his order” in monetary policy in the country, which led to the renewal of his 6-year term for four consecutive times in 1999. And 2005, 2011 and 2017.
During this period, Salameh won many international accolades and awards, most notably: the best governor of an Arab central bank and the best governor in the Middle East more than once, and he is also considered one of the best 9 central bank governors in the world. In addition, he is the first Arab central bank governor to ring the opening bell of the New York Stock Exchange in 2009.
However, this golden phase, which lasted for decades, came to an end with the onset of the economic collapse and the launch of unprecedented popular demonstrations in October 2019 against the political class accused of corruption and of prevailing over the logic of deals in running the country. Since then, Salama has sought to absorb the missile collapse of the Lebanese currency from 1,500 pounds per dollar to 95,000 per dollar, through various procedures and circulars, which experts say delay the collision and make its impact lighter.
France, Germany and Luxembourg froze 120 million euros of Lebanese assets a year ago, following an investigation targeting Salameh and four of his close associates, including his brother Raja, on charges of money laundering and “embezzlement of public funds in Lebanon amounting to more than 330 million dollars and 5 million euros, respectively, between 2002 and 2021.” ». He is currently being tried in Lebanon as well as in France and other European countries.
What did Salama do?
The researcher in economic affairs, Dr. Mahmoud Jabai, notes that “after the return of the late Prime Minister Rafik Hariri to Lebanon after the civil war, and in light of the great financial crisis that the country was going through and the collapse of its currency from 3 pounds to 3 thousand pounds, Riad Salameh was summoned due to his high experience in managing files. Cash and finance in many international companies. When he took over the governorship, he began working to improve the exchange rate, which fell from 3 thousand pounds to 1,500 pounds in order to stabilize it through several policies and ideas, including attracting capital to the country, financial investments and Gulf deposits, in addition to Hariri bringing in financial aid through the “Paris 1, 2 and 3” conferences. .
Jabai explained in a statement to Asharq Al-Awsat that “all of the above led to confidence in the ruler and emphasized the need for him, which is what kept him in his position throughout this time, especially since every time the country was exposed to financial and monetary vibrations, he could, with his policies and engineering, calm the exchange rate, regardless of Regardless of the cost that was paid by the “Central”, knowing that fixing the exchange rate was issued by the ministerial statements of successive governments.
Fixing the exchange rate
For her part, researcher in economic and financial affairs and university professor Dr. Layal Mansour considers that “his understanding with the political system allowed him to remain in office all these years,” explaining that “the awards he won are the result of the success of the exchange rate stabilization policies, especially during the difficult political and security conditions that he went through.” the country over the past years. Therefore, what can be confirmed is that he did not reap the awards because he worked to improve and develop the lira and absorb investments.
And she added in a statement to Asharq Al-Awsat: “Salama was correct when he came to the governorship and fixed the currency because in any dollarized country, currency liberalization cannot be applied to him. But after understanding the disease, it was supposed to be treated. After the year 2000, the country witnessed stages of stability, and he made a mistake because he did not set a goal before him to reduce dollarization, and he can also be blamed for the lack of transparency and his insistence on saying that the lira is fine and a thousand good.
As for the economist, Professor Jassim Ajaka, he talks about “a clear monetary goal for Salameh within the economic policy set by Hariri, which is the stability of the exchange rate with the aim of stabilizing prices in general. Which he succeeded in achieving. The fact that the ministerial statements of successive governments contain the phrase “the continuation of the policy of monetary stability” is only proof of this matter. Therefore, it is necessary to say that the social prosperity that the Lebanese people experienced from 1997 to 2019 is due to the stability of the currency, and not to the economic policies of governments, despite the political and security conditions that Lebanon went through. Therefore, the monetary stability option was a correct one.
Safety errors
In exchange for what may be considered Salama’s achievements, the list of mistakes goes on. Professor Maroun Khater, a writer and researcher in financial and economic affairs, says that “Riad Salameh is not a stand-alone clause, but rather is part of an integrated system that distributed roles among itself and exaggerated the passage through some articles of the Monetary and Credit Law, and in squandering state funds and depositors alike.” Pointing out in a statement to Asharq Al-Awsat that “if the monetary and credit law obliges the central bank to lend to the state at the government’s request, then it does not oblige a ruler to remain in his chair.” And he adds, “The sustainability of the state’s financing of banks through the (Central) made Riad Salameh a need for successive politicians, and they are mostly corrupt. The abundance of inflows secured the financing of political clientelism, quotas and corruption, and made reform absent due to conflicts of interest.
Khater stresses that “Lebanon did not reach what it reached because Riad Salameh was governor of the Banque du Liban, but rather because he was close to a political environment that incubated corruption, waste, quotas, clientelism, and dependency. Also, at the time of the recent crisis, the ruler’s queen overflowed with circulars, statements, platforms, and interventions in an attempt to mitigate the repercussions of the tragedies and calamities caused by him and his comrades in the system, with measures in which there are enough excesses and discretion.
Regarding the mistakes made by Salameh, Mahmoud Jabai says: “Whoever works makes mistakes. There may be some mistakes made with monetary policy. He may also have made a mistake by agreeing to pay all this money within the framework of the support policy, but I do not know if the laws allow him to refuse to lend to the state, but in any case he was supposed to go out to explain to people that this policy is wrong. He adds, “But there is also no doubt that Salameh took many correct measures, especially after the collapse, when he managed the monetary and economic file successfully, which makes a large part of the Lebanese still trust him and consider him capable of curbing the exchange rate.”
As for Layal Mansour, she stressed in a statement to Asharq Al-Awsat that “there is no dollarized country in the world that is not corrupt. These countries witness the highest rates of corruption, because dollarization revives and reinforces corruption. Therefore, Salameh could draw up plans to ease dollarization, as in Israel, for example, but he did not do so for 30 years, despite the country going through periods of stability!
And Layal Mansour asserts that “it was possible to avoid the collapse first by easing dollarization and strengthening confidence in the lira, as well as by not lending to the corrupt and failed state .. Salama did not give loans for projects, but rather for random disbursement in the absence of productive and investment plans.” And she adds: “It is true that (the central bank) is forced to lend to the state, but Salameh was able to go out to tell people that we are on the verge of collapse .. He was also supposed to respond to the reports of the International Monetary Fund, which warned since 2005 of the danger of dollarization and the collapse.”
Most financial experts agree that Salameh’s failure to go out to tell people what is going on and his continued financing of the state was the most prominent of his “sins.” Here, Jassem Ajaka says, “Funding the state for all this period and ratifying political promises to carry out reforms is among the things that the ruler did not have to accept even if the matter cost him his position. Everyone knows that a country lives with two chronic deficits (a deficit in the budget and a deficit in the current account) that is doomed to bankruptcy!
a ram?
Jabai believes that “after the collapse occurred, political parties tried and are still trying to find a scapegoat for the financial-monetary-political crisis, to say, “May God forgive the past, and this is the only one responsible for everything that happened, and this is what we see as unfair and malicious.” And he adds: «(The Central Bank) undoubtedly bears part of the responsibility related to monetary policy, with regard to the issue of deposits and the overlap between the treasury of the Banque du Liban and the Lebanese state. However, over the past years, we have witnessed major political crises that forced the ruler to take measures to maintain monetary stability, but there is no doubt that this is not the reason behind the collapse, given that the straw that broke the camel’s back was the decision of Hassan Diab’s government not to pay the Eurobonds, and after that the support policy that led to the disbursement of 18 billion. Dollars out of 33 billion dollars were present in the (Central) at the outbreak of the crisis, and here is the great catastrophe.
Khater agrees with Jabai that “some of those who sold principles tried to turn Riad Salameh into a (scapegoat), so they joined the ranks of the audience, but rather became on the side of the indictment instead of being with him together in the cage.”
safety alternative
Experts differ between those who consider that another ruler could have spared the country from collapsing, and those who assert that the person cannot be the cause of the crisis or the savior. In this regard, Ajaka says: “I do not think that the person of the ruler (whoever he was) would have changed what happened, and the reason is due to the Lebanese political life and to the Monetary and Credit Law, especially Article 91, which must be abolished or at least amended in order to be subject to more restrictions and no financing. The state is based solely on the government’s insistence,” considering that “the basic characteristics that whoever succeeds Salameh is supposed to possess are that he has strong knowledge of monetary policies, is able to manage the bank restructuring file, enjoys extensive international relations and is not affiliated with a political group.”
For his part, Khater affirms that “any new ruler will not have the experience and ability of Riad Salameh to maneuver and to invent measures. He is the one who spent many years practicing buying time that was destined to be wasted. However, we hope that he will not ask for any new ruler, which was asked of Riad Salameh. Hence, the central bank’s independence from politics must be the title of any new era in the governance of the Banque du Liban.
As for Layal Mansour, she believes that “any new ruler is supposed to be a specialist and versed in monetary policies and central banks. And there must be a political understanding for him to succeed. Unfortunately, this is what the country’s reality dictates.
Mahmoud Jabai does not consider that “there is a better person than Salama to manage the current crisis,” expressing his fear that after the end of his term, there will be “a great vacuum on more than one level, and that the situation will be more difficult.” In the event that a president is not elected, his term is supposed to be extended for an additional two years, because any alternative currently may not be able to manage the stage in light of the usual political rivalries. Unless a president is elected and external support comes, then the situation will be different.
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