Lebanon’s Recovery Stuck as Bank Auditors Quit Over Lack of Data
The turmoil surrounding Lebanon’s financial collapse deepened on Friday after an international firm quit its contract to audit the central bank’s accounts, a key step in unlocking billions of dollars in aid.
Outgoing Finance Minister Ghazi Wazni told the country’s president that auditors Alvarez & Marsal had terminated the agreement after being unable to secure the data the firm needed, according to the presidency’s official Twitter page.
In October, the government had given the company three more months to finish its work and vowed to facilitate the process.
The central bank, also known as Banque du Liban, has repeatedly said that banking secrecy laws dating from the 1950s prevent it from handing over all the information sought by the auditors. The bank delivered less than half of the documents that Alvarez & Marsal had requested. Changing the banking laws would require parliamentary approval.
The audit was a central demand of international donors, led by France, to enable the delivery of financial assistance and allow progress on a loan deal with the International Monetary Fund. Both are seen as essential to help Lebanon through its worst economic meltdown in decades. The country has also signed agreements with KPMG and Oliver Wyman for accounting audits.
Lebanon has been under heavy financial strain since October of last year when thousands took to the streets to protest worsening living conditions and demand the ouster of a political class they say has pillaged state coffers.
Auditors were expected to reveal how the government spent money it borrowed from the central bank, and expose corruption. A group of parliamentarians had been working on a draft law to temporarily lift the banking secrecy laws for the duration of the audit contract to allow full data access.
Prime Minister Hassan Diab, who’s ruling in a caretaker capacity as Lebanon is still without a sworn-in government, has repeatedly urged central bank Governor Riad Salameh to deliver the requested documents or risk being seen as hindering the reform process.
Diab and his government have long been critical of Salameh, blaming his monetary policy for worsening the financial crisis and failing to stem a crash in the currency.
Former Premier Saad Hariri has been tasked with forming a new administration after vowing to implement the reform initiative proposed by France.
©2020 Bloomberg L.P.