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.


Erdogan ally wants pro-Kurdish party, jailed militant to talk

Updated 6 sec ago
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Erdogan ally wants pro-Kurdish party, jailed militant to talk

  • The pro-Kurdish DEM Party, parliament’s third largest, responded by applying for its co-chairs to meet with Ocalan, founder of the outlawed Kurdistan Workers Party (PKK)

ANKARA: A key ally of Turkish President Tayyip Erdogan expanded on his proposal to end 40 years of conflict with Kurdish militants by proposing on Tuesday that parliament’s pro-Kurdish party holds direct talks with the militants’ jailed leader Abdullah Ocalan.
Devlet Bahceli, leader of the Nationalist Movement Party, made the call a month after suggesting that Ocalan announce an end to the insurgency in exchange for the possibility of his release.
The pro-Kurdish DEM Party, parliament’s third largest, responded by applying for its co-chairs to meet with Ocalan, founder of the outlawed Kurdistan Workers Party (PKK).
Erdogan described Bahceli’s initial proposal as a “historic window of opportunity” but has not spoken of any peace process.
Ocalan has been held in a prison on the island of Imrali, south of Istanbul, since his capture 25 years ago.
“We expect face-to-face contact between Imrali and the DEM group to be made without delay, and we resolutely reiterate our call,” Bahceli told his party’s lawmakers in a parliamentary meeting, using the name of the island to refer to Ocalan.
Bahceli regularly condemns pro-Kurdish politicians as tools of the PKK.
DEM’s predecessor party was involved in peace talks between Ankara and Ocalan a decade ago. Gulistan Kilic Kocyigit, DEM’s parliamentary group chairperson, said it applied to the Justice Ministry on Tuesday for its leaders to meet Ocalan.
“We are ready to make every contribution for a democratic solution to the Kurdish issue and the democratization of Turkiye,” she said.
Turkiye and its Western allies call the PKK a terrorist group. More than 40,000 people have been killed in the fighting, which in the past was focused in the mainly Kurdish southeast but is now centered on northern Iraq, where the PKK is based.
Growing regional instability and changing political dynamics are seen as factors behind the bid to end the conflict with the PKK. The chances of success are unclear as Ankara has given no clues on what it may entail.
The only concrete move so far has been Ankara’s permission for Ocalan’s nephew to visit him, the first family visit in 4-1/2 years.
Authorities are continuing to crack down on alleged PKK activities. Early on Tuesday, police detained 231 people of suspected PKK ties, the interior ministry said. DEM Party said those detained included its local officials and activists.
Earlier this month, the government replaced five pro-Kurdish mayors in southeastern cities for similar reasons, in a move that drew criticism from DEM and others.
 

 


Algeria holds writer Boualem Sansal on national security charges: lawyer

Updated 2 min 16 sec ago
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Algeria holds writer Boualem Sansal on national security charges: lawyer

“Boualem Sansal... was today placed in detention” on the basis of an article of the Algerian penal code, lawyer Francois Zimeray said
Sansal had been interrogated by “anti-terrorist” prosecutors and said he was being “deprived of his freedom on the grounds of his writing“

PARIS: Algerian authorities have remanded in custody on national security charges prominent French-Algerian novelist Boualem Sansal following his arrest earlier this month that sparked alarm throughout the literary world, his French lawyer said on Tuesday.
“Boualem Sansal... was today placed in detention” on the basis of an article of the Algerian penal code “which punishes all attacks on state security,” lawyer Francois Zimeray said in a statement to AFP.
He added that Sansal had been interrogated by “anti-terrorist” prosecutors and said he was being “deprived of his freedom on the grounds of his writing.”
Sansal, a major figure in francophone modern literature, is known for his strong stances against both authoritarianism and Islamism, as well as being a forthright campaigner on freedom of expression issues.
His detention by Algeria comes against a background of tensions between France and its former colony, which also appear to have spread to the literary world.
The 75-year-old writer, granted French nationality this year, was on November 16 arrested at Algiers airport after returning from France, according to several media reports.
The Gallimard publishing house, which has published his work for a quarter of a century, in a statement expressed “its very deep concern following the arrest of the writer by the Algerian security services,” calling for his “immediate release.”
A relative latecomer to writing, Sansal turned to novels in 1999 and has tackled subjects including the horrific 1990s civil war between authorities and Islamists.
His books are not banned in Algeria but he is a controversial figure, particularly since making a visit to Israel in 2014.
Sansal’s hatred of Islamism has not been confined to Algeria and he has also warned of a creeping Islamization in France, a stance that has made him a favored author of prominent figures on the right and far-right.
In 2015, Sansal won the Grand Prix du Roman of the French Academy, the guardians of the French language, for his book “2084: The End of the World,” a dystopian novel inspired by George Orwell’s “Nineteen-Eighty Four” and set in an Islamist totalitarian world in the aftermath of a nuclear holocaust.
The concerns about his reported arrest come as another prominent French-Algerian writer Kamel Daoud is under attack over his novel “Houris,” which won France’s top literary prize, the Goncourt.
A woman has claimed the book was based on her story of surviving 1990s Islamist massacres and used without her consent.
She alleged on Algerian television that Daoud used the story she confidentially recounted to a therapist — who is now his wife — during treatment. His publisher has denied the claims.
The controversies are taking place in a tense diplomatic context between France and Algeria, after President Emmanuel Macron renewed French support for Moroccan sovereignty over the disputed territory of Western Sahara during a landmark visit to the kingdom last month.
Western Sahara, a former Spanish colony, is de facto controlled for the most part by Morocco.
But it is claimed by the Sahrawi separatists of the Polisario Front, who are demanding a self-determination referendum and are supported by Algiers.
Daoud organized a petition signed by fellow literary luminaries published in the Le Point weekly calling for Sansal’s “immediate” release.
“This tragic news reflects an alarming reality in Algeria, where freedom of expression is nothing more than a memory in the face of repression, imprisonment and the surveillance of the entire society,” said the letter also signed by the likes of British novelist Salman Rushdie and Turkish Nobel winner Orhan Pamuk.

Winter rain piles misery on Gaza’s displaced

Updated 4 min 26 sec ago
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Winter rain piles misery on Gaza’s displaced

GAZA CITY: At a crowded camp in Gaza for those displaced by the war between Israel and Hamas, Ayman Siam laid concrete blocks around his tent to keep his family dry as rain threatened more misery.

“I’m trying to protect my tent from the rainwater because we are expecting heavy rain. Three days ago when it rained, we were drenched,” Siam said, seeking to shield his children and grandchildren from more wet weather.

Siam is among thousands sheltering at Gaza City’s Yarmouk sports stadium in the north after being uprooted by the Israel-Hamas war.

He lives in one of many flimsy tents set up at the stadium, where the pitch has become a muddy field dotted with puddles left by rainfall that washed away belongings and shelters.

People in the stadium dug small trenches around their tents, covered them with plastic sheets, and did whatever they could to stop the water from entering their makeshift homes.

Others used spades to direct the water into drains, as grey skies threatened more rain.

The majority of Gaza’s 2.4 million people have been displaced, often multiple times.

With many displaced living in tent camps, the coming winter is raising serious concerns.

Mahmud Bassal, spokesman for Gaza’s civil defense agency, said that “tens of thousands of displaced people, especially in the central and south of Gaza Strip, are suffering from flooded tents due to the rains,” and called on the international community to provide tents and aid.

International aid organizations have sounded the alarm about the deteriorating situation as winter approaches.

“It’s going to be catastrophic,” warned Louise Wateridge, an emergency officer for the UN agency for Palestinian refugees currently in Gaza.

The rainy period in Gaza lasts between late October and April, with January being the wettest month, averaging 30 to 40 millimeters of rain. Winter temperatures can drop as low as 6 degrees Celsius. Recent rain has flooded hundreds of tents.

“The rain and seawater flooded all the tents. We are helpless. The water took everything from the tent, including the mattresses, blankets and a water jug. We were only able to get a mattress and blankets for the children,” said Auni Al-Sabea, a displaced person.


Lebanese Prime Minister demands ‘immediate’ implementation of ceasefire

Updated 9 min 30 sec ago
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Lebanese Prime Minister demands ‘immediate’ implementation of ceasefire

  • Mikati said the intense wave of Israeli air strikes on Beirut on Tuesday “reaffirms that the Israeli enemy has no regard for any law or consideration"

BEIRUT: Lebanon’s Prime Minister Najib Mikati demanded in a statement on Tuesday that the international community “act swiftly” to halt Israeli aggression “and implement an immediate ceasefire.”
His comments came after Israeli Prime Minister Benjamin Netanyahu said in an address that his security cabinet would agree “this evening” on a truce deal in its war against Lebanese militant group Hezbollah.
Mikati said the intense wave of Israeli air strikes on Beirut on Tuesday “reaffirms that the Israeli enemy has no regard for any law or consideration.”
“The international community is called upon to act swiftly to stop this aggression and implement an immediate ceasefire,” he said in his statement, which was issued before a strike hit the central Hamra commercial district.


Israeli ‘aggression’ targets Syria’s Homs countryside, state news agency says

Updated 26 November 2024
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Israeli ‘aggression’ targets Syria’s Homs countryside, state news agency says

  • Blasts had been heard in the vicinity of Homs city and that the cause was under investigation

HOMS: Initial reports indicate that an Israeli “aggression” targeted two villages in northern and western areas of Syria’s Homs province, the Syrian state news agency said on Tuesday.
Earlier, Syrian state television said blasts had been heard in the vicinity of Homs city and that the cause was under investigation.
Israel has been carrying out strikes against Iran-linked targets in Syria for years but has ramped up such raids since the Oct. 7, 2023, assault on southern Israel by Hamas-led militants.