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.


Israel’s attorney general tells Netanyahu to reexamine extremist security minister’s role

Updated 15 November 2024
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Israel’s attorney general tells Netanyahu to reexamine extremist security minister’s role

  • National Security Minister Itamar Ben-Gvir criticized for interfering in police matters

JERUSALEM, Nov 14 : Israel’s Attorney General told Prime Minister Benjamin Netanyahu to reevaluate the tenure of his far-right National Security Minister Itamar Ben-Gvir, citing his apparent interference in police matters, Israel’s Channel 12 reported on Thursday.
The news channel published a copy of a letter written by Attorney General Gali Baharav-Miara in which she described instances of “illegitimate interventions” in which Ben-Gvir, who is tasked with setting general policy, gave operational instructions that threaten the police’s apolitical status.
“The concern is that the government’s silence will be interpreted as support for the minister’s behavior,” the letter said.
Officials at the Justice Ministry could not be reached for comment and there was no immediate comment from Netanyahu’s office.
Ben-Gvir, who heads a small ultra-nationalist party in Netanyahu’s coalition, wrote on social media after the letter was published: “The attempted coup by (the Attorney General) has begun. The only dismissal that needs to happen is that of the Attorney General.”


Israeli forces demolish Palestinian Al-Bustan community center in Jerusalem

Updated 15 November 2024
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Israeli forces demolish Palestinian Al-Bustan community center in Jerusalem

  • Al-Bustan Association functioned as a primary community center in which Silwan’s youth and families ran cultural and social activities

LONDON: Israeli forces demolished the office of the Palestinian Al-Bustan Association in occupied East Jerusalem’s neighborhood of Silwan, whose residents are under threat of Israeli eviction orders. 

The Palestinian Authority’s Ministry of Culture condemned on Thursday the demolition of Al-Bustan by Israeli bulldozers and a military police force. 

The ministry said that “(Israeli) occupation’s arrogant practices against cultural and community institutions in Palestine, and specifically in Jerusalem, are targeting the Palestinian identity, in an attempt to obliterate it.” 

Founded in 2004, the Al-Bustan Association functioned as a primary community center in which Silwan’s youth and families ran cultural and social activities alongside hosting meetings for diplomatic delegations and Western journalists who came to learn about controversial Israeli policies in the area. 

Al-Bustan said in a statement that it served 1,500 people in Silwan, most of them children, who enrolled in educational, cultural and artistic workshops. In addition to the Al-Bustan office, Israeli forces also demolished a home in the neighborhood belonging to the Al-Qadi family. 

Located less than a mile from Al-Aqsa Mosque and Jerusalem’s southern ancient wall, Silwan has a population of 65,000 Palestinians, some of them under threat of Israeli eviction orders.  

In past years, Israeli authorities have been carrying out archaeological digging under Palestinian homes in Silwan, resulting in damage to these buildings, in search of the three-millennial “City of David.” 


Israeli strike kills 12 after hitting civil defense center in Lebanon’s Baalbek, governor tells Reuters

Updated 14 November 2024
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Israeli strike kills 12 after hitting civil defense center in Lebanon’s Baalbek, governor tells Reuters

  • Eight others, including five women, were also killed and 27 wounded in another Israeli attack

CAIRO: An Israeli strike killed 12 people after it hit a civil defense center in Lebanon’s city of Baalbek on Thursday, the regional governor told Reuters adding that rescue operations were ongoing.
Eight others, including five women, were also killed and 27 wounded in another Israeli attack on the Lebanese city, health ministry reported on Thursday.
Meanwhile, Lebanese civil defense official Samir Chakia said: “The Civil Defense Center in Baalbek has been targeted, five Civil Defense rescuers were killed.”
Bachir Khodr the regional governor said more than 20 rescuers had been at the facility at the time of the strike.


‘A symbol of resilience’ — workers in Iraq complete reconstruction of famous Mosul minaret

Updated 14 November 2024
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‘A symbol of resilience’ — workers in Iraq complete reconstruction of famous Mosul minaret

  • Workers complete reconstruction of 12th-century minaret of Al-Nuri Mosque
  • Tower and mosque were blown by Daesh extremists in 2017

High above the narrow streets and low-rise buildings of Mosul’s old city, beaming workers hoist an Iraqi flag into the sky atop one of the nation’s most famous symbols of resilience.

Perched precariously on scaffolding in high-vis jackets and hard hats, the workers celebrate a milestone in Iraq’s recovery from the traumatic destruction and bloodshed that once engulfed the city.

On Wednesday, the workers placed the last brick that marked the completed reconstruction of the 12th-century minaret of Al-Nuri Mosque. The landmark was destroyed by Daesh in June 2017 shortly before Iraqi forces drove the extremist group from the city.

Known as Al-Hadba, or “the hunchback,” the 45-meter-tall minaret, which famously leant to one side, dominated the Mosul skyline for centuries. The tower has been painstakingly rebuilt as part of a UNESCO project, matching the traditional stone and brick masonry and incorporating the famous lean.

“Today UNESCO celebrates a landmark achievement,” the UN cultural agency’s Iraq office said. “The completion of the shaft of the Al-Hadba Minaret marks a new milestone in the revival of the city, with and for the people of Mosul. 

“UNESCO is grateful for the incredible teamwork that made this vision a reality. Together, we’ve created a powerful symbol of resilience, a true testament to international cooperation. Thank you to everyone involved in this journey.”

The restoration of the mosque is part of UNESCO’s Revive the Spirit of Mosul project, which includes the rebuilding of two churches and other historic sites. The UAE donated $50 million to the project and UNESCO said that the overall Al-Nuri Mosque complex restoration will be finished by the end of the year.

UNESCO Director-General Audrey Azoulay celebrated the completion of the minaret by posting “We did it!” on social media site X.

She thanked donors, national and local authorities in Iraq and the experts and professionals, “many of whom are Moslawis,” who worked to rebuild the minaret.

“Can’t wait to return to Mosul to celebrate the full completion of our work,” she said.

The Al-Nuri mosque was built in the second half of the 12th century by the Seljuk ruler Nur Al-Din. 

After Daesh seized control of large parts of Iraq in 2014, the group’s leader, Abu Bakr Al-Baghdadi, declared the establishment of its so-called caliphate from inside the mosque.

Three years later, the extremists detonated explosives to destroy the mosque and minaret as Iraqi forces battled to expel them from the city. Thousands of civilians were killed in the fighting and much of Mosul was left in ruins.


US hands Lebanon draft truce proposal -two political sources

Updated 14 November 2024
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US hands Lebanon draft truce proposal -two political sources

  • The US has sought to broker a ceasefire that would end hostilities between its ally Israel and Hezbollah

BEIRUT: The US ambassador to Lebanon submitted a draft truce proposal to Lebanon’s speaker of parliament Nabih Berri on Thursday to halt fighting between armed group Hezbollah and Israel, two political sources told Reuters, without revealing details.
The US has sought to broker a ceasefire that would end hostilities between its ally Israel and Iran-backed Hezbollah, but efforts have yet to yield a result. Israel launched a stepped-up air and ground campaign in late September after cross-border clashes in parallel with the Gaza war.