Mastermind behind Lebanon financial policies leaves

After his term ends later this year, Lebanon’s CB Governor Riad Salameh said that he intends to depart. This brings an end to a three-decade career tainted by contentious decisions that have resulted in the country’s economic collapse.

On Friday, Salameh, 72, said in an interview with Asharq TV that he will not seek another term as president. Besides, he is also the subject of international money laundering and embezzlement investigations. The experienced banker claimed he has the papers to establish his innocence.

Departure from the post will likely lead to more disruption in the economy

The departure will mark the start of a new chapter in the World Bank’s description of globally the most severe upheaval since the mid-nineteenth century. Salameh has been one of the few constants in Lebanon as Beirut has struggled with conflict, intractable political standoffs, and an economic collapse. He is well-known on Wall Street and in foreign capital.

Salameh did private banking at Merrill Lynch before becoming governor in 1993. Before the Lebanese currency peg derailed in late 2019, he played a crucial role in maintaining it for over two decades.

Lebanon’s economy collapsed when it defaulted on $30B in foreign debt two years ago. High inflation and a currency collapse wreaked havoc on people’s life savings. The crisis highlighted Salameh’s responsibility for initiatives such as the central bank’s so-called financial engineering initiative. It began in 2016 to boost reserves.

By forcing politicians to find candidates for a position reserved for the Maronite Christian community as part of Lebanon’s sectarian power-sharing arrangement, the decision not to seek another term could unleash even more volatility. The first vice governor, who is a Shiite Muslim, would take over if the position is empty under the statute until a permanent replacement is chosen.

As the crisis deepens, international authorities start probing Salameh

Salameh is also facing allegations of corruption in Lebanon. In a collaborative probe into money laundering and embezzlement of public funds in Lebanon between 2002 and 2021, the outgoing governor is one of the key suspects. Last month, a European judicial delegation visited Lebanon and interviewed bankers and former central bank officials.

According to Bloomberg, Swiss authorities are also investigating claims that Salameh benefited from the sale of Lebanese Euro bonds held in the central bank’s portfolio. The connection between Raja Salameh and the brokerage business Forry Associates Ltd, is also of concern to officials. Latter is said to have collected commissions on the sale of Eurobonds to investors.