At the end of this month, Riad Salameh will conclude a 30-year tenure as the Governor of the Banque Du Liban (BDL), having taken office on August 30, 1993.
This lengthy term has consisted of several challenges, faced by Salameh both in Lebanon and abroad, including probable money laundering and embezzlement. Despite the hurdles, his tenure has also been defined by several notable accomplishments.
Salameh’s position was renewed four times, in 1999, 2005, 2011, and 2017. Governors hold six-year terms, while the four deputy governors are in office for five years under the Code of Money and Credit.
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Today, the vacancy at the head of the pyramid, the President of the Republic, has resulted in a government with limited powers, at a time when critical decisions must be made to save the country from economic collapse. This highlights the need for a functioning government with the power to act decisively.
As per the Constitution, the governors of BDL are appointed by a council of ministers, upon proposal from the Minister of Finance. In the event of the governor’s vacancy, illness, or dismissal, the first deputy governor, who is traditionally a Shia Muslim, assumes the governor’s duties, as per the Code on Money and Credit.
However, a recent joint statement issued by the governor’s deputies, calling for the appointment of new governors as a successor to Salameh, has caused quite a stir. A move like this is rare, and is seen as a warning of mass resignation, or even a retreat. The joint statement emphasizes the need for a governor to be appointed by the council of ministers, and under the impression of, “appropriate action.”
According to the statement, the four governor’s deputies believe that, “the concept of business may not be withdrawn to the highest monetary authority of the State.” They have stressed the need to appoint a new governor as soon as possible, in accordance with Article 18 of the Money and Credit Code. Failure to do so could result in the deputies taking action, “deemed appropriate for the public interest.”
Article 18 specifies that the governor shall be appointed for six years by decree in the council of ministers upon the suggestion of the minister of finance. The deputy governors shall be appointed for five years by decree in the cabinet, on the proposal of the minister of finance, while consulting with the governor regarding the functions appointed by the governor.
The deputy governor of the BDL, Salim Shaheen, has stated that the four deputy governors could all resign unless a new governor is appointed after Salameh’s term expires later this month. Local media have also speculated that the governor’s deputies may resign to push for the appointment of a replacement and avoid taking responsibility for the consequences of Salameh’s exit.
Lebanon is currently facing one of the world’s three worst economic crises, as described by the World Bank. In an effort to address the situation, Riad Salameh attempted to secure a $3 billion loan from the International Monetary Fund (IMF) last year, with the condition that Lebanon implements a set of reforms before the loan is approved by the IMF executive board. However, the delay in passing and implementing the reforms jeopardized the agreement.
Just days ago, following its fourth Article IV consultation with Lebanon, the IMF executive board declared that Lebanon is enduring an ‘unprecedented’ currency, sovereign, and banking crisis that has persisted for over three years. The country’s economy has shrunk by approximately 40 percent since the onset of the crisis.
The IMF further noted that inflation in Lebanon has soared since the start of the crisis, with the annual rate reaching 270 percent in April of last year after a severe drop in the currency exchange rate in the first quarter of 2023.
The IMF has also stated that the delay in restructuring the financial sector has cost Lebanese depositors $10 billion since 2020. The delay in reforms has led to a decrease in foreign currency deposits, that could be recovered upon restructuring the banking sector.
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