Lebanon starts central bank audit in effort to exit financial crisis

Reuters , Wednesday 9 Sep 2020

The government agreed in July to hire turnaround specialist Alvarez & Marsal to conduct the forensic audit

FILE PHOTO: A view of Lebanon's Central Bank building in Beirut, Lebanon April 23, 2020. REUTERS

Lebanon has started a forensic audit of the central bank, the Finance Ministry said on Wednesday, one of the steps donors want to see to help the nation claw its way out of a crippling financial crisis.

The government agreed in July to hire turnaround specialist Alvarez & Marsal to conduct the forensic audit, which typically involves close examination of an institution's financial records and can potentially identify any misuse of funds.

Starting the audit was a requirement in a French roadmap that sets out steps to secure desperately needed international aid and help end a crisis that poses the biggest threat to Lebanon's stability since the 1975-1990 civil war.

The ministry said, as a first step, Alvarez would present to caretaker Finance Minister Ghazi Wazni "a preliminary list of information required from Banque du Liban," the central bank whose role has faced close scrutiny since the crisis erupted.

Crushed by a mountain of debt, Lebanon's financial system crumbled in 2019, with banks shutting out customers from deposits while the local currency went into tailspin. This year, Lebanon defaulted on its sovereign debt for the first time.

The crisis was exacerbated by last month's huge port explosion that ruined a swathe of Beirut.

Talks on a deal with the International Monetary Fund, vital to winning broader international aid, stalled after just a few weeks this year as the central bank, commercial banks and politicians disputed the scale of losses in the system.

The outgoing government, which resigned after the port blast, said the forensic audit would show transparency to reassure donors.

Riad Salameh, Banque du Liban's governor for 27 years, has defended the central bank's role, saying it maintained stability as successive governments racked up debt. He has dismissed what he said were rumours he would quit.

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