Close Menu
    Facebook Instagram LinkedIn
    • العربية (Arabic)
    • English
    • Français (French)
    Facebook Instagram LinkedIn
    Middle East Transparent
    • Home
    • Categories
      1. Headlines
      2. Features
      3. Commentary
      4. Magazine
      Featured
      Headlines Zouzou Cash

      Sky Theft: How MEA’s Monopoly Is Pricing Lebanon Out of the Skies

      Recent
      19 June 2025

      Sky Theft: How MEA’s Monopoly Is Pricing Lebanon Out of the Skies

      18 June 2025

      Preparing the ground for the big Iranian operation

      15 June 2025

      Brig. « Yossi »  Kuperwasser: We are promoting a new order! Saudis, Lebanon and Syria can join!

    • Contact us
    • Archives
    • Subscribe
    • العربية (Arabic)
    • English
    • Français (French)
    Middle East Transparent
    You are at:Home»Categories»Features»The world’s worst central banker retires 

    The world’s worst central banker retires 

    0
    By The Economist on 5 August 2023 Features

    He presided over economic collapse in Lebanon

    In most countries, a 95% drop in the currency would be a firing offence for a central-bank governor. Not in Lebanon, which by late 2021 was two years into a grinding financial crisis. The lira, long pegged at 1,500 to the dollar, had plummeted to 27,500. Najib Mikati, the prime minister, was asked if it was time to replace the longtime head of the Banque du Liban (bdl). His answer was clear: “one does not change one’s officers during a war”.

     

    The war is still raging—but even Lebanon’s politicians, it seems, have their limits. The lira now trades at 90,000 to the dollar. gdp has contracted by 40% since 2018. After three decades running the bdl, Riad Salameh at last lost his job on July 31st. No permanent replacement has been announced. But Mr Mikati nonetheless declined to extend his term.

    Supporters once called Mr Salameh “the magician” because he kept a stable currency in an unstable country. Like all magic tricks, Mr Salameh’s illusion demanded that the audience not look too closely: his tale is one not just of personal failure and disgrace, but also of a country where politicians refuse to take responsibility for policy.

    Mr Salameh was appointed in 1993 by Rafik Hariri, Lebanon’s first post-civil war prime minister. Together they built an economy that relied on massive foreign inflows to finance yawning deficits (the current-account shortfall hit 26% of gdp in 2014) and sustain the currency peg. At its peak, the country’s banking sector held deposits worth four times the country’s gdp.

    The scheme began to sputter in 2015, as regional instability and the oil-price crash hurt inflows. To lure fresh deposits Mr Salameh started a scheme known as “financial engineering”. The bdl paid above-market interest rates to borrow dollars from commercial banks, which in turn offered generous rates to depositors.

    For a time, everyone was happy: the central bank padded its gross reserves, while banks and their customers enjoyed healthy profits. Nobody in power asked questions. One of Mr Salameh’s former lieutenants says the governor never brought “financial engineering” before the bdl’s central committee for a debate. Nor did parliament perform any oversight.

    In 2018 a few bankers and economists tried to sound an alarm. Mr Salameh declared the lira alf khair, “a thousand goodnesses”, a Lebanese superlative. Most of the country took him at his word.

    A year later, however, commercial-bank deposits began to shrink. There was no longer enough new money to pay off old obligations. By December 2019 even Mr Salameh could no longer pretend. The lira had slipped from its peg to 2,000 to the dollar. Asked by a television reporter where it would stop, he shrugged: “No one knows.”

    Yet no one dared remove him. Mr Salameh had forged close ties with Lebanon’s political, business and media elites, and with powerful foreign patrons like America and France. He had free rein to issue a madcap series of decrees that financed subsidies, imposed capital controls and sought to manage the exchange rate. They hurt depositors, and the country’s foreign reserves have dropped from $31bn in 2018 to $10bn even as the currency collapsed.

    The most glaring policy error is Sayrafa, an electronic foreign-exchange platform meant to tame a growing black market and halt wild swings in the lira. In practice it served as a giveaway to banks, importers and other wealthy elites. The Sayrafa rate consistently lags behind the black-market rate by about 20%. Anyone with access to the platform could buy dollars at a discount and resell them on the parallel market. The World Bank estimated in May that such round-trip arbitrage has generated $2.5bn in profits (at the bdl’s expense).

    Not that anyone else pursued better ideas. Hassan Diab, the previous prime minister, drafted a decent rescue plan but was blocked by bankers and mps. After three years of bail-out talks with the imf, parliament has yet to pass a restructuring plan for Lebanon’s zombie banks. Even the bad ideas, like holding a fire-sale of state assets to recapitalise the banks, have not advanced beyond talk.

    The bdl has four deputy governors, who under Lebanon’s sectarian power-sharing rules are drawn from four different sects. In early July they threatened to resign if Mr Salameh’s term ended without a replacement. They have since backed down and offered a few sound policy proposals, among them scrapping the Sayrafa scheme.

    Much of what they propose, however, requires assent from politicians who cannot agree on anything. Lebanon has not had a president since October, despite 12 attempts to pick one in parliament. Abbas Ibrahim, the powerful intelligence chief, finished his term in March; he too has not been replaced. Another vacancy looms in January, when Joseph Aoun, the army chief, is due to retire. The country is collapsing, and no one is in charge.

    As for Mr Salameh, his retirement is unlikely to be quiet. Authorities in Belgium, France, Germany, Liechtenstein, Luxembourg and Switzerland are all investigating him for corruption. He is accused of stealing up to $330m from the central bank. Investigators allege that some of the money wound up in his brother’s Swiss bank accounts and that other sums were used to buy property across Europe. (Mr Salameh denies the charges, saying he left a previous job at Merrill Lynch in 1993 with $23m and invested it wisely.)

    In May a French judge issued an international arrest warrant after he failed to show up for a hearing. Germany has also filed a red notice with Interpol. Lebanese law does not require him to be extradited, and many observers think the country’s judiciary is too politicised to prosecute him at home. Still, as one former associate bluntly puts it, “he is hated”. For his final trick, the magician may hope to pull off a disappearing act.

    The Economist

    Share. Facebook Twitter LinkedIn Email WhatsApp Copy Link
    Previous ArticleAcademic Says ‘Islamic Republic Cannot Survive!’
    Next Article Iran Strengthens Its Palestinian Cards
    Subscribe
    Notify of
    guest

    guest

    0 Comments
    Newest
    Oldest Most Voted
    Inline Feedbacks
    View all comments
    RSS Recent post in french
    • En Syrie, la mystérieuse disparition du corps de Hafez el-Assad 11 June 2025 Apolline Convain
    • En Syrie, après les massacres d’alaouites, la difficulté de recueillir des témoignages : « Je n’ai pas confiance » 5 June 2025 Madjid Zerrouky
    • Guerre en Ukraine : Kiev démontre sa force de frappe en bombardant l’aviation russe avec ses drones, jusqu’en Sibérie 2 June 2025 Le Monde
    • Liban : six mois après l’entrée en vigueur d’un cessez-le-feu avec Israël, une guerre de basse intensité se poursuit 23 May 2025 Laure Stephan
    • DBAYEH REAL ESTATE 22 May 2025 DBAYEH REAL ESTATE
    RSS Recent post in arabic
    • يوم لجأ الرئيس السوري ووزير دفاعه محمد عمران إلى بيت الكتائب في طرابلس (1) 19 June 2025 نبيل يوسف
    • السيستاني دعا لـ”حل سلمي”، ومُعَمّمون بالنجف اعتبروا الحرب على خامنئي حرباً على “الأمة الإسلامية”! 18 June 2025 شفاف- خاص
    • (بالفيديو): رسالة رضا بهلوي إلى الأمة الإيرانية: النظام ينهار.. تكفي انتفاضة شعبية لإنهاء هذا الكابوس إلى الأبد 17 June 2025 شفاف- خاص
    • “أضربوهم يا إسرائيل”! 17 June 2025 منصور هايل
    • صديقي عباس.. والصراع الإيراني – الإسرائيلي 17 June 2025 أحمد الصرّاف
    26 February 2011

    Metransparent Preliminary Black List of Qaddafi’s Financial Aides Outside Libya

    6 December 2008

    Interview with Prof Hafiz Mohammad Saeed

    7 July 2009

    The messy state of the Hindu temples in Pakistan

    27 July 2009

    Sayed Mahmoud El Qemany Apeal to the World Conscience

    8 March 2022

    Russian Orthodox priests call for immediate end to war in Ukraine

    Recent Comments
    • Giant Squirrel on Holier Than Thou: Politics and the Pulpit in America
    • Edward Ziadeh on As Church awaits a Conclave, President Trump puts up picture of himself as next Pope
    • Victoria Perea on As Church awaits a Conclave, President Trump puts up picture of himself as next Pope
    • Victoria Perea on As Church awaits a Conclave, President Trump puts up picture of himself as next Pope
    • M sam on Kuwait: The Gulf state purging tens of thousands of its citizens
    Donate
    Donate
    © 2025 Middle East Transparent

    Type above and press Enter to search. Press Esc to cancel.

    loader

    Inscrivez-vous à la newsletter

    En vous inscrivant, vous acceptez nos conditions et notre politique de confidentialité.

    loader

    Subscribe to updates

    By signing up, you agree to our terms privacy policy agreement.

    loader

    اشترك في التحديثات

    بالتسجيل، فإنك توافق على شروطنا واتفاقية سياسة الخصوصية الخاصة بنا.

    wpDiscuz