On Monday, the First Deputy Governor of the Central Bank of Lebanon, Wassim Mansouri, urged the government to implement long-awaited reforms to address a deep financial crisis, stating that he will limit the Central Bank's lending to the heavily indebted state. Mansouri is set to temporarily assume the role of governor after deeply divided political factions failed to appoint a successor to Riad Salameh, despite the country enduring its worst financial crisis in four years, which has plunged many Lebanese into poverty and resulted in the freezing of depositors' funds.
Salameh (73) leaves the Central Bank after 30 years in the position, with his term ending today, marred in recent years by a financial collapse that paralyzed the banking system, along with corruption allegations against him both domestically and abroad, allegations he denies. The failure to appoint a new governor reflects a broader paralysis that has left Lebanon without a fully empowered government or president, exacerbating the void in a state paralyzed by ongoing financial collapse for four years.
Mansouri described previous state lending policies as unsustainable, during a press conference at the Central Bank's headquarters. He stated that the new leadership intends to impose strict limits on when the Central Bank can lend to the government, emphasizing that this funding should gradually cease. He said that lending to the state should be conditional upon repayment to the bank.
Mansouri also asserted that the authorities should gradually eliminate a controversial trading platform known as Sayrafa and lift the peg on the local currency. He remarked, "We are at a crossroads," adding, "I assure you... no financing of government disbursement will be signed outside my convictions and outside the appropriate legal framework. In fact, we are looking at a short transitional period that allows for state funding under a law passed by the Parliament and under its oversight as part of a comprehensive package that allows for the commencement of genuine reform efforts through... the approval of reform laws."
The crisis has led to the emergence of a range of exchange rates for the pound, which has depreciated by about 98 percent since 2019. Mansouri stated, "Unifying the exchange rate and liberalizing it will happen without the Central Bank's intervention or additional spending of funds." He also mentioned that the authorities should gradually eliminate the Sayrafa platform.
Mansouri (51) called on the government to implement reforms forming a capital control law and a financial restructuring law, as well as the state budget for 2023 within six months, stating that this is the "final opportunity" for Lebanon to enact changes and lift the freeze on deposits. He indicated that the only way to stop the government's reliance on Central Bank funding is to improve public finances.
