Lebanon’s former central bank governor cost country $7.7bn, report says

Riad Salameh, Lebanon's central bank governor, attends an interview with Reuters in Beirut, Lebanon February 15, 2010. (File/Reuters)
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Updated 11 August 2023
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Lebanon’s former central bank governor cost country $7.7bn, report says

  • Salameh ‘monopolized’ decisions, discussions
  • Ex-governor faces US sanctions, arrest warrants in Europe

BEIRUT: A preliminary forensic audit of Lebanon’s central bank by professional services firm Alvarez & Marsal has painted a damning picture of the institution under former Governor Riad Salameh.

Caretaker Finance Minister Youssef Khalil presented copies of the report on Banque du Liban to caretaker Prime Minister Najib Mikati, Parliament Speaker Nabih Berri and other lawmakers on Friday.

It comprises 332 pages in 14 sections and details complex accounting, banking and administrative operations.

The report comes after the US Treasury on Thursday announced sanctions on Salameh, as well as his son Nadi Salameh, brother Raja Salameh, assistant Marianne Howayek and friend Anna Kozakova.

Salameh was still in office when Alvarez & Marsal won the audit contract in 2021. He stepped down last month.

The report said that the financial engineering conducted by the former governor was “highly costly, with a total cost of 115 trillion Lebanese pounds ($7.7 billion) between 2015 and 2020.”

The balance sheet did not show any losses, according to the report. Instead they were recorded under the categories of “other assets” and “clearance and settlement accounts.”

No explanation was provided for the payment of interest to major depositors and borrowers.

The central bank resorted to issuing bonds and printing money, resulting in increased government spending and causing an inflation issue that affected its ability to stabilize the rate of change, the document said.

In its preliminary findings, the report revealed that transfers to the account of Forry Associates Ltd. — owned by Raja Salameh and the subject of European judicial inquiries into possible corruption — totaled $333 million, including $111 million in illegal transfers.

Civil movements have blamed Lebanon’s economic collapse since 2019 on the failure of successive governments and the financial engineering pursued by Salameh.

The report said that the value of loans granted by the central bank totaled 15 trillion Lebanese pounds and that 23 individuals, entities and associations had unjustly benefited from financial support exceeding $100,000 each between 2015 and 2020.

As a result of the unconventional standards adopted by the central bank and its manipulation of accounts, its deficit rose to 77 trillion Lebanese pounds in 2020, the report said.

It said also that while the bank had a foreign currency surplus of $7.2 billion at the end of 2015, by the end of 2020 that had become a deficit of $50.7 billion.

The rapid deterioration of the bank’s financial situation was not reflected in its balance sheet and financial statements, as its use of unconventional accounting standards allowed it to exaggerate the value of its assets and profits, the report said.

The document also revealed minutes from a meeting of the bank’s central council that showed how Salameh shaped monetary policy, established accounting standards that concealed accumulated losses, and determined which banks would benefit from loans and financial engineering.

Members of the central council did not challenge those decisions or oversee the related details, it said.

The report said that the unconventional policies applied by the central bank included: “Deferral of interest costs to increase profitability; creation of seigniorage balances to offset part of the deferred costs of matured CDs and pain coupons on outstanding instruments to increase profitability; overstating the carrying value of the Lebanese treasury bills by not recognizing the impairment in their value; recording of unrealized appreciation/(depreciation) of gold balance sheet resulting in understatement/(overstatement) of assets and equity; offsetting the Ministry of Finance’s US dollar overdraft liability to the central bank against treasury LBP deposits resulting in an understatement of both assets and liabilities; and offsetting the loans and deposits under leverage agreements resulting in an understatement of both assets and liabilities.”

The report also addressed the attraction of foreign deposits and their conversion into local assets. It found that a substantial portion of foreign currency assets were, in reality, local assets and said that if these amounts were to be returned, they would exert immense pressure on the Lebanese state, people and economy.

The report said that at the end of each year, the governor directed the accounting department to offset financial transaction expenses. Consequently, the financial data released did not accurately portray the bank’s true financial position.

“The positions and losses of BDL are presented through netting of assets and liabilities and through recording them in unexplained and general accounts such as ‘other assets’ and ‘clearance and settlement accounts,’” the report said.

“No loss is shown at all in the balance sheet,” it added, noting that no information was provided to the public, such as profit and loss accounts from 2015 to 2020, interest paid to major depositors or granted to major borrowers, or the methodology for reporting those interests.

Also, details such as deposit segmentation were withheld, as were the costs of financial engineering and related decisions, the report said.

Instead, the central bank resorted to monetization to increase the supply of the Lebanese pound, leading to an increase in the country’s overall expenditure.

The report said that central banks might sometimes engage in such activities, but an increase in those operations created an inflation problem and affected the ability to stabilize the exchange rate.

It said the central bank also used financial engineering to keep US dollars within the banking system but once the phase of exchange rate stabilization ended, the approach of profiting from monetization became unconventional and unstable.

The rise in the value of the Lebanese pound led to economic growth, especially in sectors that earned profits in foreign currency, the report said.

The use of monetization was not entirely prudent and not disclosed to the public, it said.


Gaza rescuers say children among 12 killed in Israeli strikes

Updated 4 sec ago
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Gaza rescuers say children among 12 killed in Israeli strikes

  • Israeli air strikes and shelling continues across Gaza, even as mediators push on with their efforts to halt the fighting
GAZA STRIP, Palestinian Territories: Gaza’s civil defense agency said Israeli forces pounded the Palestinian territory on Thursday, killing at least 12 people including three girls, 15 months into the war.
The latest strikes came as Qatar, Egypt, and the United States mediate negotiations in Doha between Israel and Hamas militants for a deal to end the fighting in Gaza and secure the release of hostages.
Three girls and their father were killed when an air strike hit their house in Nuseirat refugee camp in central Gaza, the civil defense agency reported.
Local paramedic Mahmud Awad said he helped transfer the bodies of two girls and their father, Mahmud Abu Kharuf to a hospital.
“Their bodies were found under the rubble of the house that the occupation bombed in the Nuseirat camp,” Awad said. He added that the body of the third girl had been found earlier by residents.
In a separate strike, eight people were killed when their house was struck in the town of Jabalia in northern Gaza, where the army has focused its offensive since October 6.
Several more were wounded in that strike, the civil defense agency said.
Israeli air strikes and shelling continues across Gaza, even as mediators push on with their efforts to halt the fighting and secure a deal for the release of hostages still held in Gaza.
On Wednesday, US Secretary of State Antony Blinken said in Paris that a ceasefire was “very close.”
“I hope that we can get it over the line in the time that we have,” Blinken said, referring to President-elect Donald Trump’s inauguration on January 20.
But if not, “I believe that when we get that deal – and we’ll get it – it’ll be on the basis of the plan that President (Joe) Biden put before the world back in May.”
In May, Biden unveiled a three-phase plan for the release of the hostages and a ceasefire in Gaza.

After 12 failed attempts over 2 years, Lebanon’s parliament will try to pick a president

Updated 09 January 2025
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After 12 failed attempts over 2 years, Lebanon’s parliament will try to pick a president

  • There are indications that Thursday’s vote may produce a head of state
  • The leading candidate is Lebanese army commander Joseph Aoun

BEIRUT: Lebanon’s parliament was set Thursday to make yet another effort to elect a president, filling a vacuum that’s lasted for more than two years.
While 12 previous attempts have failed to choose a successor to former President Michel Aoun, whose term ended in October 2022, there are indications that Thursday’s vote may produce a head of state.
The leading candidate is Lebanese army commander Joseph Aoun, no relation to the former president. He is widely seen as the preferred candidate of the United States and Saudi Arabia, whose assistance Lebanon will need as it seeks to rebuild after a 14-month conflict between Israel and the Lebanese militant group Hezbollah.
Hezbollah previously backed another candidate, Suleiman Frangieh, the leader of a small Christian party in northern Lebanon with close ties to former Syrian President Bashar Assad.
However, on Wednesday, Frangieh announced he had withdrawn from the race and endorsed Aoun, apparently clearing the way for the army chief.
Lebanon’s fractious sectarian power-sharing system is prone to deadlock, both for political and procedural reasons. The small, crisis-battered Mediterranean country has been through several extended presidential vacancies, with the longest lasting nearly 2 1/2 years between May 2014 and October 2016. It ended when former President Michel Aoun was elected.
As a sitting army commander, Joseph Aoun is technically barred from becoming president by Lebanon’s constitution. The ban has been waived before, but it means that Aoun faces additional procedural hurdles.
Under normal circumstances, a presidential candidate in Lebanon can be elected by a two-thirds majority of the 128-member house in the first round of voting, or by a simple majority in a subsequent round.
But because of the constitutional issues surrounding his election, Aoun would need a two-thirds majority even in the second round.
Other contenders include Jihad Azour, a former finance minister who is now the director of the Middle East and Central Asia Department at the International Monetary Fund; and Elias Al-Baysari, the acting head of Lebanon’s General Security agency.
The next head of state will face daunting challenges apart from implementing the ceasefire agreement that ended the Israel-Hezbollah war and seeking funds for reconstruction.
Lebanon is six years into an economic and financial crisis that decimated the country’s currency and wiped out the savings of many Lebanese. The cash-strapped state electricity company provides only a few hours of power a day.
The country’s leaders reached a preliminary agreement with the IMF for a bail-out package in 2022 but have made limited progress on reforms required to clinch the deal.


Israeli military tightens media rules over war crimes prosecution concern

Updated 09 January 2025
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Israeli military tightens media rules over war crimes prosecution concern

  • Under the new rules, media interviewing soldiers of the rank of colonel and under will not be able to display their full names or faces, similar to the rules that already exist for pilots, an Israeli military spokesperson says

JERUSALEM: The Israeli military placed new restrictions on media coverage of soldiers on active combat duty amid growing concern at the risk of legal action against reservists traveling abroad over allegations of involvement in war crimes in Gaza.
The move came after an Israeli reservist vacationing in Brazil left the country abruptly when a Brazilian judge ordered federal police to open an investigation following allegations from a pro-Palestinian group that he had committed war crimes while serving in Gaza.
Under the new rules, media interviewing soldiers of the rank of colonel and under will not be able to display their full names or faces, similar to the rules that already exist for pilots and members of special forces units, Lt. Col. Nadav Shoshani, an Israeli military spokesperson told reporters.
The interviewees must not be linked to a specific combat event they participated in.
“This is our new guideline to protect our soldiers and to make sure they are safe from these types of incident hosted by anti-Israel activists around the world,” Shoshani said.
He said that under existing military rules, soldiers were already not supposed to post videos and other images from war zones on social media “even though that’s never perfect and we have a large army.” There were also long-standing rules and guidelines for soldiers traveling abroad, he said.
Shoshani said activist groups, such as the Belgium-based Hind Rajab Foundation, which pushed for the action in Brazil, were “connecting the dots” between soldiers who posted material from Gaza and then posted other photos and videos of themselves while on holiday abroad.
Last year, the International Criminal Court issued arrest warrants against Israeli Prime Minister Benjamin Netanyahu and former Defense Minister Yoav Gallant, as well as a Hamas leader, Ibrahim Al-Masri, over alleged war crimes in Gaza, drawing outrage in Israel.
Shoshani said there had been “a handful” of cases where reservists traveling abroad had been targeted, in addition to the case in Brazil, all of which had been started by activist groups pushing authorities for an investigation.
“They didn’t open an investigation, they didn’t press charges or anything like that,” he said.


Syria is ‘the cornerstone for regional stability,’ GCC tells UN Security Council

Updated 09 January 2025
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Syria is ‘the cornerstone for regional stability,’ GCC tells UN Security Council

  • US representative says transition process and government that emerges from it must prioritize destruction of Assad regime’s chemical weapons stockpiles
  • Syrian envoy says new Syria ‘willing to play a positive role in international arena … promote international and regional peace and security, will not engage in any conflict or war’

NEW YORK CITY: The Gulf Cooperation Council on Wednesday stressed the need to respect the independence and territorial integrity of Syria, reject foreign interference, combat terrorism and respect the country’s religious and cultural diversity as it embarks on a new chapter of its history after the fall of long-time dictator Bashar Assad.

Speaking on behalf of the GCC, Kuwait’s permanent representative to the UN, Tareq Albanai, expressed its support for a comprehensive and inclusive political process, moves toward national reconciliation, and efforts to rebuild the state.

He called for national unity and comprehensive dialogue, adding that the “stability of Syria is the cornerstone for stability in region.”

Albanai was speaking at the Security Council’s first meeting of the year on Syria. He told members that the GCC decided to participate in the meeting only “to confirm our determination to help the country politically, economically, developmentally and humanitarianly.”

GCC member states categorically reject the repeated attacks on Syria by Israeli occupation forces and call for their immediate withdrawal from Syrian territories, he added.

“We renew our firm position that the Golan is Syrian territory and condemn the expansion of Israeli settlements in the occupied Golan,” Albanai said.

He also called for the lifting of the economic sanctions imposed on Syria during the civil war.

Egypt’s permanent representative to the UN, Osama Abdel Khalek, speaking on behalf of the UN Arab Group, also condemned the ongoing Israeli occupation of the Golan Heights, and what he described as “Israel’s opportunistic exploitation of the current situation to occupy further Syrian territories, bomb cities and infrastructure.”

He urged the Security Council to intervene and put an end to the Israeli “aggression, occupation” and “the illegal presence of all foreign forces in Syria.”

Syria’s permanent representative to the UN, Kusay Aldahak, told the council that caretaker authorities in the country are willing to build “friendly relations with all UN member states based on cooperation and shared interests and away from the policies of polarization.”

He added that the “new Syria is willing to play a positive role in the international arena. It will promote international and regional peace and security, and will not engage in any conflict or war.”

Aldahak called on the UN to “immediately and fully lift the unilateral coercive measures; provide necessary financing to meet needs and recover basic services, mainly electricity; support livelihood projects and sustainable development; reconstruct damaged service facilities; ensure de-mining; rid Syria of the remnants of war; and allow dignified refugees to return to their cities and homes.”

The UN’s humanitarian chief, Tom Fletcher, told council members that close to 13 million Syrians face acute food insecurity at a time when the World Food Programme has been forced to reduce the amount of food assistance it provides by 80 per cent in the past two years as a result of funding shortfalls.

More than 620,000 Syrians remain displaced as a result of the operation to remove Assad in November and December, on top of the 7 million who had already been displaced by more than a

decade of civil war. In the northwest of the country alone, 2 million people are living in camps, Fletcher said.

US ambassador Dorothy Shea said the transition process and the Syrian government that emerges from it must ensure any chemical weapons that remain in the former Assad regime’s stockpiles are secured and destroyed.

“We are encouraged by the cooperation to date and call for the continued commitment of relevant actors in Syria to work with the Organization for the Prohibition of Chemical Weapons, the United Nations, and other state and non-state partners to chart a course for the complete and verifiable elimination of any remaining elements of a chemical weapons program, and assist released detainees and the families of those whose whereabouts remain unknown,” she said.

Shea also urged the interim government to deter individual acts of vengeance, and to partner with international institutions to identify ways to ensure that those guilty of war crimes and crimes against humanity are held accountable.

Shea said the US welcomes “positive messages from Hayat Tahrir Al-Sham but will ultimately look for progress in actions, not words. We are looking for actions and words that will explore policies that prioritize the well-being of the Syrian people.”

The UN’s special envoy for Syria, Geir Pedersen, said he stands ready to work with the caretaker authorities “on how the nascent and important ideas and steps so far articulated and initiated could be developed towards a credible and inclusive political transition.”

The UK’s permanent representative to the UN, Barbara Woodward, said she was encouraged by the timelines set by the interim authorities for drafting a new constitution and holding elections and a national dialogue, and by their early engagement with the international community.

She called for their continued cooperation with UN as she welcomed the caretaker government’s efforts “to secure the chemical weapons stock and work with OPCW to fully declare and verify the destruction of such weapons. Now is the moment to close the Syria chemical weapons file once and for all.”

Russian ambassador Vassily Nebenzia said: “Syria has more than enough problems and their severity should in no case be underestimated.”

He warned of the “fairly high risk of intensification of hostilities” in many parts of the country, in particular Aleppo and Quneitra. He also highlighted “the direct threat to the territorial integrity of Syria” arising from “the unlawful actions of Israel, which is carrying out a policy of fait accompli in the occupied Golan Heights, and 500 square kilometers of Syrian land have already been seized.”

Nebenzia blamed sanctions imposed by the US “and its satellites” for exacerbating the humanitarian crisis in the country. As result of these sanctions, the Syrian economy is “under extreme pressure and is not able to cope with the challenges facing the country,” he added.


Egypt unveils ancient rock-cut tombs and burial shafts in Luxor

Updated 08 January 2025
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Egypt unveils ancient rock-cut tombs and burial shafts in Luxor

CAIRO: Egypt unveiled several discoveries near the famed city of Luxor on Wednesday, including ancient rock-cut tombs and burial shafts dating back 3,600 years.

They were unearthed at the causeway of Queen Hatshepsut’s funerary temple at Deir Al-Bahri on the Nile’s West Bank, according to a statement released by Zahi Hawass Foundation for Antiquities & Heritage. It said it worked in tandem with the Supreme Council of Antiquities on the site since September 2022.

Artifacts found at the tombs included bronze coins with the image of Alexander the Great dating to the Time of Ptolemy I (367-283), children’s toys made of clay, cartonnage and funerary masks that covered mummies, winged scarabs, beads and funerary amulets.

Hawass told reporters that the discoveries could “reconstruct history” and offer an understanding of the type of programs ancient Egyptians designed inside a temple.

The Archeologists also found the remains of Queen Hatshepsut’s Valley Temple, rock-cut tombs dating back to the Middle Kingdom (1938 B.C. — 1630 B.C.), burial shafts from the 17th dynasty, the tomb of Djehuti-Mes and part of the Assassif Ptolemaic Necropolis.

The rock-cut tombs had been previously robbed during the Ptolemaic period and later. Still, the Egyptian teams uncovered some artifacts such as pottery tables that were used to offer bread, wine and meat.

Inside the burial shafts dating back to 1580 B.C. — 1550 B.C., anthropoid wooden coffins were found, including one that belonged to a young child. It remained intact since its burial some 3,600 years ago.