Will Michel Aoun replace the governor of the central bank?

March 19, 2017
Quasi-autonomy required. Lebanon’s Central Bank Governor Riad Salameh speaks in Beirut. (Reuters)

It is expected for any elected president to appoint his own people to key positions in govern­ment, all with the aim of implementing reforms and other measures geared towards strengthening and improving the economy and the governing process. In this respect, Michel Aoun, Lebanon’s new president, is no different. His term in office opened with his appointing his daughters as advisers and General Joseph Aoun as commander of the army.
Seemingly Aoun’s thirst for power is only outmatched by his effort to return Christians to their former glory as the ultimate overlords of Lebanon, a status they unwillingly relinquished following the end of the civil war in 1990. Consequently, Aoun’s logic dictates that all senior appointments in government, especially Christian posts, entail the candidate be from his own camp or in his good graces.
Those criteria seem to be lacking in Riad Salameh, the governor of the Banque du Liban since 1993. Salameh, who has served under three presidents, is considered by many the architect of Lebanon’s monetary policy and a skilled banker who has shielded the economy and the banking sector from the roller-coaster nature of Lebanese politics.
Equally, many opponents of Sala­meh, Michel Aoun chiefly among them, have criticised his lack of vision and propensity for enriching Lebanese banks by taking out more loans to cover the huge debts (ap­proximately $74 billion) that late prime minister Rafik Hariri and his successive governments brought upon the country.
Salameh is perceived by some as responsible for the economy’s ruin by presiding over the biggest Ponzi scheme in the history of Lebanon, in which debt was used to pay more debt while transfer­ring wealth from the populace to developers and banks. Proponents of this last view, led by Hezbollah’s mouthpiece Al Akhbar newspa­per, have relentlessly campaigned to discredit Salameh’s monetary policy and regulatory measures, going as far as to accuse him of conspiring with the United States to impose sanctions on Hezbollah supporters and their institutions.
This all seems to indicate that Salameh’s days as governor of the central bank might be numbered. Although Salameh, like any other civil servant, is replaceable, oust­ing him now might have lasting implications on Lebanon’s econo­my, especially vis-à-vis the spectre of US sanctions on Lebanese banks. Salameh has worked hard to stabi­lise the Lebanese currency. Thus, his removal might create a feeling of distrust in the business and banking worlds.
Salameh’s economic policy, or lack of it, might be up for question but what is certain is that he and other leading bankers in Lebanon, among them Antoun Sehnaoui (Société Générale de Banque au Liban) and Saad Azhari (BLOM Bank), have lobbied tirelessly in Europe and the United States to keep Lebanon off the sanctions lists, thus saving what remained of Lebanon’s failing economy.
Given this fact, as well as Aoun’s persistent disregard of UN resolu­tions, particularly UN Security Council Resolution 1701, and his recent statements in support of Hezbollah, replacing Salameh with anyone with ties to the president, regardless of competence, can­not bode well for Lebanon. Such a step would expose Lebanon even further and engender the reprisal of the international community against the country’s political sys­tem as well as its economy.
When Lebanese policymakers decided in 1963 to empower the central bank and its governor by passing the Code of Money and Credit, they consciously gave the governor quasi-autonomy to allow him to carry out all his duties re­gardless of the politics of the time. It is, therefore, perhaps counter­productive as well as precarious for Aoun and his allies to take full con­trol of the government, especially its economy. Any blunder on their part would not only mean a failed state but also a failed economy to go along with it.

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