Lebanon’s Central Bank must not fall victim to Hezbolla
With the country in its worst economic crisis in decades, the country stands at a critical political crossroad, writes James Wilson.
Riad Salameh the Central Bank Governor| Photo credit: The Daily Star and Mohammad Azakir
Last week, Prime Minister Hassan Diab of Lebanon strongly criticised Riad Salameh, the Governor of Lebanon’s Central Bank. On Wednesday, Mr Salameh hit back and highlighted the sustained campaign against him. Is this dispute simply, as the Financial Times described, a “feud” and a “public fight”? Or is it that the campaign against Mr Salameh runs much deeper?
There are growing concerns that behind the attacks on Mr Salameh lie an attempt by the Iran-backed Shi’ite group Hezbollah to oust the bank’s governor, using their ally Prime Minister Hassan Diab as their voice. With Lebanon in an excruciating economic and financial crisis, this is not the time to allow Hezbollah their usual influence.
Mr Salameh gave a press conference this week to remind the Prime Minister of the bank’s transparency and also the need for the bank to retain its independence. Mr Salemeh is one of the world’s longest serving bank governors and has been credited with keeping the Lebanese currency stable in the two decades leading up to the current crisis and also praised for shoring up Lebanon’s banking sector using his “financial engineering” techniques.
French economist Nicolas Bouzou, writing recently in the newspaper Les Echos, praised Mr Salameh’s leadership at the bank during what is a undoubtedly a challenging time for the country: “As for the Central Bank of Lebanon, it is the stable point in a country in convulsion. Led by the serious Riad Salameh, the bank was at the heart of the tumult and managed to maintain the fixed parity of the currency with the dollar and its measures made it possible to ensure that the incoming financial flows to the country were not interrupted, which is essential to finance the current account deficit and the public deficit.”
"With Lebanon in an excruciating economic and financial crisis, this is not the time to allow Hezbollah their usual influence"
It is important to see the political context in Lebanon. Mr Diab’s premiership is backed by the militant group Hezbollah and their ally Gebran Bassil, the former Foreign Minister and President of the Christian Free Patriotic Movement (FPM). With Hezbollah-backed Mr Diab’s attacks on the Central Bank’s governor, it is clear that Hezbollah are also extending their reach into the economic and financial zone, beyond their already tight grip on politics.
Mona Alami, Senior Fellow at the Atlantic Council, explains: “Hezbollah has been working for years on integrating itself into the Lebanese state… Traditionally, Hezbollah members have shied away from sensitive government positions, with its members handling agriculture, youth, industry, and more recently, health. Despite its political caution, the group has direct influence on essential institutions from security to foreign policy.
A tell-tale sign that the attacks on Mr Salameh are initiated by Hezbollah is that the Hezbollah-affiliated newspaper Al-Akbar immediately had negative headlines about the governor on their website and their ally Gebran Bassil also echoed much of Mr Diab’s criticism of Mr Salameh, a sure sign for many Lebanon observers that the Bassil-Hezbollah alliance is behind the attacks on the governor of the Central Bank.
There is also international concern that the attacks on Mr Salameh are likely motivated by his unwillingness to let Hezbollah evade the international sanctions against them. He is known, according to an insider at one Western embassy, to have “played things by the book as far as sanctions against Hezbollah are concerned. He did not let them get away with anything. The international community appreciates his steadfastness on that, but we can be sure Hezbollah does not. Of course they want him out, so they can get somebody into that role who is a little more sympathetic to them.”
"Hezbollah’s irritation over Mr Salameh’s cooperation with the international community and USA on the sanctions and anti-money-laundering initiatives is very likely to have been a factor"
Hezbollah’s irritation over Mr Salameh’s cooperation with the international community and USA on the sanctions and anti-money-laundering initiatives is very likely to have been a factor.
With Lebanon floundering under its worst economic crisis in decades, the country is at a critical crossroads, having defaulted on 90 billion US Dollars of debt in March. The Central Bank must be allowed to do its job without fear of politicised attack. It is also a moment for Lebanon to consider how long it wishes to have its chances of recovery impeded by the influence of Hezbollah
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