Amidst the applause and music of a small crowd and a marching band, the tenure of Riad Salameh as Central Bank governor came to a closure after 30 years.
Salameh ended his tenure in the midst of a deteriorating socioeconomic crisis and with himself subject to charges of money laundering and embezzlement of public funds on both local and international levels and an Interpol notice.
Gradually, the ex-Central Bank governor went from international award-winner and being hailed as the architect of the “solidity” of the Lebanese banking system by many political groups and supporters to being abandoned by these same supporters who found no more political interest in backing him.
Eventually, Salameh’s name is bound to be associated with the country’s elite-level Ponzi scheme and the state of affairs that he left the country’s financial system in: one of chaos, corruption, and crisis. His legacy, on the other hand, is bound to be quantified by the more than $72 billion of financial losses accrued by the country.
A Brief History
Salameh was the longest serving central bank governor in the world, appointed in 1993 and then again in 1999, 2005, 2011 and 2017. Had he not been re-appointed in 2017, many estimate he could have been spared the public upset that occurred in 2019 and afterwards.
Some of his most notable actions include pegging the Lebanese Pound to the US Dollar until the 2019 crisis, and, as Central Bank governor, overseeing the overall financial system in which private banks infamously have lent the Lebanese government funds in US Dollars.
In addition, under the leadership of Salameh, the country witnessed the 2016 financial engineering schemes in the context of sovereign debt and fiscal crises.
The financial schemes were mired with contentious aspects, including but not limited to their opaque nature and lack of transparency, unsustainability in terms of debt obligations and increased financial burden, shortsightedness, and a plethora of risks highly associated with the collapse in 2019.
Many argue that the stability that some people identified the Lebanese banking sector with was artificial and financial calculations indicated the unsustainable nature of such reforms.
In 2019, as the country entered a multidimensional crisis, the flaws within the Lebanese financial system were uncovered, with many rightfully pointing fingers to the culpability of Central Bank governorship, including political parties such as Hezbollah who had actively participated in his reappointment.
Salameh, however, received a fair share of defense from a number of political parties, many of which have members affiliated or holding shares in private banks, in addition to traditional mainstream media platforms.
With actors such as Ghada Aoun launching a legal attack on Salameh, pro-Salameh actors attempted to associate the anti-Salameh movement with Aoun, in a national schism that closely mimicked the “8 March/14 March” divide.
Alternative political groups, journalists and activists, however, maintained their campaigns against the governorship of Salameh while dissociating themselves with traditional political parties, avoiding the fall into a binary equation. With international legal charges launched against the ex-governor, it’s safe to say his circle of friends greatly decreased throughout his tenure.
More recently, the Central Bank had set up the Sayrafa platform in the context of the exchange rate crisis, a financial tool that facilitated illicit gains according to a World Bank report which also criticized the Central Bank’s policy to continue printing Lebanese pounds and claimed the presence of inaccuracies and discrepancies in the numbers that the Bank provided regarding the Lebanese economy.
Scandals and International Charges
While Salameh’s affiliations and financial connections to Lebanese political elites have long been established, a series of national and international developments played a major role in uncovering many of his extra-mandate activities.
In 2021, the Pandora Papers revealed new details regarding offshore companies owned by Salameh and family members while at the same time being investigated by French prosecutors for money laundering.
In 2023, France issued an arrest warrant against Salameh after he failed to appear before prosecutors for corruption charges. A multinational European judicial team initiated the investigation on various financial crimes, including illicit enrichment and alleged laundering of $330 million.
Lebanon’s Financial System Under Salameh
Salameh was part and parcel of a financial system, political regime and an overall policymaking direction in the country which allowed financial accumulation by the country’s elites and whose costs were paid by the country’s poorest households.
The general budgets allocated throughout the last years highly neglected essential areas such as the educational sector (as seen in the state of the Lebanese University) and productive agricultural and industrial sectors, while it promoted shortsighted plans for rentier and service-based activities.
The tax system put in place in the country for the last 30 years is characterized by its highly regressive qualities, allocating huge portions on taxes such as VAT which disproportionately impact the worse off while exempting real estate speculations and financial schemes by elites and their affiliated companies.
Debt servicing also remained a pillar of Lebanese policymaking throughout the last years which misallocated public funds while covering up for monetary decisions by media and politically supported narratives of stability.
The Post-Salameh Era
Salameh ends his tenure while legally charged and celebrated by a few and more importantly, while Lebanese depositors still have limited access to their funds and residents find it harder to make ends meet.
As politicians have failed to choose a successor, Wassim Mansouri, first vice governor of the Central Bank since 2020 and distant cousin of Speaker of Parliament Nabih Berri, is succeeding Salameh as acting governor.
While Mansouri asserted readiness to implement reforms which he hopes remain undeterred by political interests, his enthusiasm is not shared by several groups who see this succession as a continuation of Salameh’s policy direction.
Others, on the other hand, considered the end of Salameh’s tenure as a decisive stage, one where a new policy direction can be taken and which includes a restructuring of the banking sector, a division of losses according to responsibilities and a follow-up on the state of the forensic audit.
As the crisis accentuates and is compounded by a multiplicity of developments, the post-Salameh era is estimated to be hard on both the new governor and Lebanese residents.