Can Lebanon’s new central bank governor break the cycle of economic crisis?

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Updated 31 March 2025
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Can Lebanon’s new central bank governor break the cycle of economic crisis?

  • Lebanon appointed Karim Souaid as its central bank governor after a two-year vacancy, which in itself was a breakthrough
  • The new Banque du Liban chief inherits a crumbling economy in a nation beset with political rivalries and blighted by conflict

LONDON: As Lebanon faces up to its broken finances, neglected infrastructure and postwar reconstruction, the appointment of Karim Souaid as the new central bank governor marks an important step toward economic recovery.

On March 27, after weeks of government wrangling, 17 of the cabinet’s 24 ministers voted to name asset manager Souaid as governor of Banque du Liban, the country’s National News Agency reported.

Souaid replaces interim governor Wassim Mansouri, who led the central bank after Riad Salameh’s controversial 30-year tenure ended in 2023 — almost a year before his arrest on embezzlement, money laundering and fraud charges tied to financial commissions.

The choice of candidate was critical for both domestic and international stakeholders, as the role is key to enacting the financial reforms required by donors, including the International Monetary Fund, in exchange for a bailout.

Souaid’s appointment comes with high expectations. His priorities include restarting talks with the IMF, negotiating sovereign debt restructuring and rebuilding foreign exchange reserves.

Nafez Zouk, a sovereign analyst at Aviva Investors, told Arab News that the new central bank chief “needs to be able to demonstrate some commitment to the IMF’s approach for restructuring the banking sector.”




Karim Souaid was appointed as the new central bank governor. (Supplied)

Souaid brings extensive experience in privatization, banking regulations and structuring large-scale economic transitions. He is also the founder and managing partner of the Bahrain-based private investment firm Growthgate Equity Partners.

However, his success as central bank chief will depend on international support, as Western nations and financial institutions have linked aid to sweeping economic reforms, including banking sector restructuring.

Last year, the EU pledged €1 billion ($1.08 billion) to help Lebanon curb refugee flows to Europe. Half was paid in August, while the rest is contingent on “some conditions,” EU Commissioner Dubravka Suica said during a February visit.

“The main precondition is the restructure of the banking sector ... and a good agreement with the International Monetary Fund,” she said after meeting Lebanese President Joseph Aoun.

However, critics have raised concerns about Souaid’s ties to Lebanon’s financial elite and members of the entrenched ruling class, fearing that his policies might favor the banking sector over broader economic reform, local media reported.

Prime Minister Nawaf Salam has also expressed reservations about Souaid’s appointment, saying the central bank chief “must adhere, from today, to the financial policy of our reformist government… on negotiating a new program with the IMF, restructuring the banks and presenting a comprehensive plan” to preserve depositors’ rights.




An excavator removes wreckage at site of an Israeli airstrike that targeted a house in the southern Lebanese village of Kfar Tibnit. (AFP)

Before Souaid’s appointment, Aoun and Salam were unable to reach a consensus on a candidate, according to local media reports. The president therefore insisted on putting the matter to a Cabinet vote.

Echoing the prime minister’s apprehensions is Nasser Saidi, a former Lebanese economy minister and central bank vice governor, who raised concerns about the selection process for the new central bank chief, warning that powerful interest groups may have too much influence.

He told the Financial Times that the decision carried serious consequences for Lebanon’s economic future, saying that one of Souaid’s biggest challenges will be convincing the world to trust the nation’s banking system enough to risk investing in its recovery.

“The stakes are too high: You cannot have the same people responsible for the biggest crisis Lebanon has ever been through also trying to restructure the banking sector,” said Saidi, who served as first vice governor of the Banque du Liban for two consecutive terms.

“How are we going to convince the rest of the world that it can trust Lebanon’s banking system, and provide the country with the funding it needs to rebuild (after the war)?”




The World Bank ranks the economic collapse among the worst globally since the mid-19th century. (AFP/File)

Last month, the IMF welcomed Lebanon’s request for support in tackling its protracted economic crisis. In February, after meeting with the newly appointed finance minister, Yassine Jaber, the international lender showed openness to a new loan agreement.

Lebanon’s economy has been in a state of turmoil since it suffered a financial crash in late 2019, compounded by the COVID-19 pandemic, the Beirut port blast of August 2020 and the 14-month Israel-Hezbollah conflict.

The national currency has lost more than 90 percent of its value and food prices have soared almost tenfold since May 2019. Citizens have struggled to access their savings since banks imposed strict withdrawal limits, effectively trapping deposits.

Lebanon’s prolonged crisis, triggered by widespread corruption and excessive spending by the ruling elite, has driven the country from upper-middle-income to lower-middle-income status, with gross domestic product per capita falling 36.5 percent from 2019 to 2021.

The World Bank ranks the economic collapse among the worst globally since the mid-19th century.

The Israel-Hezbollah war, which began Oct. 8, 2023, and concluded with a fragile ceasefire in November 2024, is estimated to have caused $3.4 billion in damage to Lebanese infrastructure, with economic losses of up to $5.1 billion.

Combined, these figures total 40 percent of Lebanon’s GDP.

The IMF has outlined key conditions for government action. These include addressing weak governance and implementing a fiscal strategy that combines debt restructuring with reforms to restore credibility, predictability and transparency in the fiscal framework.

It has also urged Lebanon to pursue a comprehensive financial sector restructuring, acknowledge losses at private banks and the central bank, and protect smaller depositors. Additionally, it calls for the establishment of a credible monetary and exchange rate system.

Lebanese economist Saidi said that the IMF “quite correctly and wisely” demanded comprehensive economic reforms.

INNUMBERS

• 36.5% Lebanon’s GDP per capita contraction from 2019 to 2021.

• $8.5bn Economic and infrastructure cost of Israel-Hezbollah conflict.

In a March 14 interview with BBC’s “World Business Report,” he said that the government must address fiscal and debt sustainability, restructure public debt, and overhaul the banking and financial sector.

But hurdles remain. Saidi added that while Lebanon “has a government today that I think is willing to undertake reforms, that does not mean that parliament will go along.”

Lebanon also needs political and judicial reform, including an “independent judiciary,” he added.

Nevertheless, Saidi told the BBC that Lebanon, for the first time, has “a team that inspires confidence” and has formed a cabinet that secured parliament’s backing.




Protesters during a rally outside the Palace of Justice in Beirut. (AFP/File)

Despite this positive step, Lebanon must still address structural failures in its public institutions, rooted in decades of opacity, fragmented authority and weak accountability.

Zouk of Aviva Investors believes another big challenge to reforming the financial sector will be “the large resistance from banks and their shareholders.

“Without some degree of accountability and transparency, I struggle to see how the rest of the reform agenda can be implemented,” he said.

There are “several proposals being circulated that would run counter to the IMF and would far from restore credibility and trust to the Lebanese financial sector.”

Saidi highlighted the broader challenges Lebanon faces, cautioning that without financing for reconstruction, achieving socioeconomic and political stability will remain elusive.

“If you don’t have financing for reconstruction, you’re not going to have socioeconomic stability, let alone political stability,” he said.

“There has to be a willingness by all parties to go along with the reforms,” he added, highlighting that this is where external support is crucial, particularly from Saudi Arabia, the UAE, France, Europe and the US.




Lebanon endured a 14-month Israel-Hezbollah conflict. (AFP/File)

Saidi said that support must go beyond helping bring the new government to power — it must include assistance, especially in terms of security.

In March, Reuters cited five sources saying the US was engaging with Lebanon’s new government on selecting the central bank governor to combat corruption and prevent the Iran-backed Hezbollah from exploiting the banking system for illicit financing.

A US official who met the candidates before Souaid’s appointment told the news agency that the US was making its guidance on candidates’ qualifications clear to the Lebanese government.

“The guidelines are: No Hezbollah and nobody who has been caught up in corruption. This is essential from an economic perspective,” the official said.

The move, according to Reuters, highlights the US administration’s continued focus on weakening Hezbollah. The group has seen its political and military clout diminished by Israel, which decimated its leadership, drained its finances and depleted its once formidable arsenal.

Firas Modad, a Middle East analyst and founder of Modad Geopolitics, told Arab News that he believes US approval was a prerequisite for selecting the next Banque du Liban governor.

“The next governor is irrelevant,” he said a few days before Souaid’s appointment. “He will need to be approved by the Americans, and the Lebanese system will not appoint someone that the Americans do not approve of.”




Washington is pushing Lebanon’s new government to disarm Hezbollah and address longstanding issues with Israel. (AFP/File)

Modad added that Lebanon faces a stark choice: “Normalization with Israel or civil war.” This decision will “determine whether there is a chance to rebuild the financial system and recover some money for the bondholders and smaller depositors.”

On March 22, the Israeli military mounted airstrikes on Lebanon amid renewed violence in Gaza and Yemen. A “second wave” targeted sites in southern and eastern Lebanon, according to the Israeli military.

Israel claimed that the attacks targeted “Hezbollah command centers, infrastructure sites, terrorists, rocket launchers and a weapons storage facility.” It marked the deadliest escalation since the ceasefire in late November.

Washington is pushing Lebanon’s new government to disarm Hezbollah and address longstanding issues with Israel, including border demarcation and the release of Lebanese captives through enhanced diplomatic talks.

Hezbollah, meanwhile, has rejected calls to disarm as long as Israel continues to occupy Lebanese territory.

 


US says supports gas deals with Kurdistan region after Iraq lawsuit

Updated 56 min 52 sec ago
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US says supports gas deals with Kurdistan region after Iraq lawsuit

  • “We encourage Baghdad and Irbil to work together to expand domestic gas production as soon as possible

WASHINGTON: The United States said Tuesday it supported American energy companies’ contracts with Iraq’s autonomous Kurdish region after the Iraqi government filed a lawsuit against them.
Regional prime minister Masrour Barzani announced the signing of the two deals valued at tens of billions of dollars during a visit to Washington, in which he met Friday with Secretary of State Marco Rubio.
Rubio in his meeting “commended” the deals with US companies, State Department spokeswoman Tammy Bruce told reporters.
“We encourage Baghdad and Irbil to work together to expand domestic gas production as soon as possible. These types of economic partnerships will benefit both the American and Iraqi peoples and help Iraq move toward energy independence,” she said.
“We also believe that US and Iraqi interests are best served by having a strong, resilient Iraqi Kurdistan region within a sovereign and prosperous federal Iraq
“As far as the nature of the lawsuits, obviously we are looking forward to continuing these kinds of deals. We expect these kinds of deals to flourish, and expect and would hope that they would be facilitated,” she said.
 

 


Israeli troops fire warning shots as Palestinians overwhelm new Gaza food center

Updated 28 May 2025
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Israeli troops fire warning shots as Palestinians overwhelm new Gaza food center

  • The UN and other humanitarian organizations have rejected the new system, saying it won’t be able to meet the needs of Gaza’s 2.3 million people

MUWASI, Gaza Strip: Chaos erupted on the second day of aid operations by a new US-backed group in Gaza as desperate Palestinians overwhelmed a center distributing food on Tuesday, breaking through fences. Nearby Israeli troops fired warning shots, sending people fleeing in panic.
An AP journalist heard Israeli tank and gunfire and saw a military helicopter firing flares. The Israeli military said its troops fired the warning shots in the area outside the center and that “control over the situation was established.”
At least three injured Palestinians were seen by The Associated Press being brought from the scene, one of them bleeding from his leg.
The distribution hub outside Gaza’s southernmost city of Rafah had been opened the day before by the Gaza Humanitarian Foundation, which has been slated by Israel to take over aid operations. The UN and other humanitarian organizations have rejected the new system, saying it won’t be able to meet the needs of Gaza’s 2.3 million people and allows Israel to use food as a weapon to control the population. They have also warned of the risk of friction between Israeli troops and people seeking supplies.
Palestinians have become desperate for food after nearly three months of Israeli blockade pushed Gaza to the brink of famine.
Palestinians walk miles for food, finding chaos
Palestinians at the scene told AP that small numbers of people made their way to the GHF center Tuesday morning and received food boxes. As word spread, large numbers of men, women and children walked for several miles from the sprawling tent camps along Gaza’s Mediterranean coast. To reach the hub, they had to pass through nearby Israeli military positions.
By the afternoon, hundreds of thousands were massed at the hub. Videos show the crowds funneled in long lines through chain-link fence passages. Two people said each person was searched and had their faces scanned for identification before being allowed to receive the boxes. Crowds swelled and turmoil erupted, with people tearing down fences and grabbing boxes. The staff at the site were forced to flee, they said.
The AP journalist positioned some distance away heard gunfire and rounds of tank fire. Smoke could be seen rising from where one round impacted. He saw a military helicopter overhead firing flares.
“There was no order, the people rushed to take, there was shooting, and we fled,” said Hosni Abu Amra, who had been waiting to receive aid. “We fled without taking anything that would help us get through this hunger.”
“It was chaos,” said Ahmed Abu Taha, who said he heard gunfire and saw Israeli military aircraft overhead. “People were panicked.”
Crowds were seen running from the site. A few managed to secure aid boxes — containing basic items like sugar, flour, pasta and tahini — but the vast majority left empty-handed.
US-backed group says they ‘fell back’ to ensure safety
In a statement, GHF said that because of the large number of Palestinians seeking aid, staff at the hub followed the group’s safety protocols and “fell back” to allow them to dissipate, then later resumed operations.
A spokesperson for the group told the AP that no shots were fired from GHF. Speaking on condition of anonymity in line with the group’s rules, the spokesperson said the protocols aim at “avoiding loss of life, which is exactly what happened.”
GHF uses armed private contractors to guard the hubs and the transportation of supplies. The hub is also close to Israeli military positions in the Morag Corridor, a band of territory across the breadth of Gaza that divides Rafah from the rest of the territory.
GHF has set up four hubs around Gaza to distribute food, two of which began operating on Monday — both of them in the Rafah area.
The UN and other humanitarian groups have refused to participate in GHF’s system, saying it violates humanitarian principles. They say it can be used by Israel to forcibly displace the population by requiring them to move near the few distribution hubs or else face starvation – a violation of international law. They have also opposed the use of facial recognition to vet recipients.
Israeli Prime Minister Benjamin Netanyahu on Tuesday commented on the turmoil at the Rafah center, saying, “There was some loss of control momentarily … happily we brought it under control.”
He repeated that Israel plans to move Gaza’s entire population to a “sterile zone” at the southern end of the territory while troops fight Hamas elsewhere.
UN says it has been struggling to transport aid
Israel has said the new system is necessary because it claims Hamas has been siphoning off supplies that reach Gaza. The UN has denied that any significant diversion takes place.
Throughout the war, the UN and other aid groups have conducted a massive operation distributing food, medicine and other supplies to wherever Palestinians are located. Israel says GHF will replace that network, but the past week has allowed a trickle of aid to enter Gaza for the UN to distribute.
COGAT, the Israeli military agency in charge of coordinating aid, said on Tuesday that 400 trucks of supplies, mainly food, was waiting on the Gaza side of the main crossing from Israel, but that the UN had not collected them. It said Israel has extended the times for collection and expanded the routes that the UN can use inside Gaza.
Jens Laerke, spokesperson for the UN humanitarian office OCHA, told reporters in Geneva that agencies have struggled to pick up the supplies “because of the insecure routes that are being assigned to us by the Israeli authorities to use.” He said the amount of aid allowed the past week was “vastly insufficient.”


Israeli strike on south Lebanon kills one: ministry

Updated 27 May 2025
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Israeli strike on south Lebanon kills one: ministry

  • The ministry said an “Israeli enemy strike” on a motorcycle killed one man in Yater
  • The Israeli military did not immediately comment on the attack

BEIRUT: Lebanon’s health ministry said an Israeli strike on south Lebanon killed one man on Tuesday, the latest attack despite a ceasefire between Israel and Iran-backed Hezbollah.

In a statement, the ministry said an “Israeli enemy strike” on a motorcycle killed one man in Yater, in south Lebanon’s Bint Jbeil district.

The Israeli military did not immediately comment on the attack, which came after it said it killed a Hezbollah member in south Lebanon’s Majdal Zoun on Monday.

Israel has continued to launch strikes on its northern neighbor despite the November truce that sought to halt more than a year of hostilities with Hezbollah, including two months of full-blown war.

Under the terms of the ceasefire deal, only UN peacekeepers and the Lebanese army should be deployed in southern Lebanon, though Israel has kept its forces in five areas it has declared strategic.

Lebanon has called on the international community to pressure Israel to end its attacks and withdraw all its troops.


UN says it has no information over Gaza aid group deliveries

Updated 28 May 2025
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UN says it has no information over Gaza aid group deliveries

GENEVA: The United Nations said on Tuesday it had no information on whether the Gaza Humanitarian Foundation, a US-backed aid group, had actually delivered any supplies inside the war-ravaged Palestinian territory.

The little-known group, which has stirred controversy since surfacing in early May, announced on Monday it had begun distributing truckloads of food in the Gaza Strip.

But officials from the UN humanitarian agency OCHA, and UNRWA, the UN agency for Palestinian refugees, said they were unaware whether any aid had actually been distributed.

The UN and international aid agencies have said they will not cooperate with the GHF, amid accusations it is working with Israel without any Palestinian involvement.

“It is a distraction from what is actually needed, which is a reopening of all the crossings in to Gaza; a secure environment within Gaza; and faster facilitation of permissions and final approvals of all the emergency supplies that we have just outside the border that need to get in,” OCHA spokesman Jens Laerke told a press briefing in Geneva.

UNRWA spokeswoman Juliette Touma told journalists aid to Gaza was still “very, very far” from what was needed: a minimum of 500 to 600 trucks per day loaded with food, medical aid, fuel, water and other basic supplies, she said, speaking via video-link from Amman.

Israel, which recently stepped up its offensive against militant group Hamas, drew international condemnation after implementing a blockade on March 2 that has sparked severe food and medical shortages.

Humanitarian aid has begun trickling back into Gaza in recent days after Israel lifted the 11-week blockade.

Touma said no UNRWA supplies had gone in since March 2, while Laerke said he had no information on how many UN trucks had passed through the Kerem Shalom crossing in the last 24 hours, partly because Israel does not allow them to have a fixed presence there.


Israeli forces raid foreign exchange stores across West Bank

Updated 27 May 2025
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Israeli forces raid foreign exchange stores across West Bank

  • One killed, eight other people were injured by Israeli forces during a raid in Nablus

RAMALLAH: Israeli forces raided foreign exchange stores in several West Bank cities including Ramallah and Nablus on Tuesday, accusing their parent company of “connections with terrorist organizations,” according to an army closure notice.

“Israeli forces are taking action against Al-Khaleej Exchange Company due to its connections with terrorist organizations,” a leaflet left at the company’s Ramallah location read.

An AFP journalist present at the scene reported several army vehicles at the store’s entrance while soldiers came out carrying items covered by a cloth.

Two army vehicles escorted one of the store’s employees away from the premises.

In the northern West Bank city of Nablus, Israeli forces raided a second foreign exchange store belonging to the Al-Khaleej company, as well as a gold store, according to another AFP journalist.

Some Palestinian residents of Nablus were seen clashing with the army during the raid, throwing objects at troops.

The Ramallah-based Ministry of Health said one man was killed and eight other people were injured by Israeli forces’ live ammunition during a raid in Nablus on Tuesday.

The Palestinian Red Crescent said it treated 20 people for tear gas inhalation and three others who were injured by rubber bullets.

The Palestinian movement Hamas condemned the raids on foreign exchange shops.

“These assaults on economic institutions, accompanied by the looting of large sums of money and the confiscation of property, are an extension of the piracy policies adopted by the (Israeli) government,” the group said in a statement, adding that the targeted companies were “operating within the law.”