June 22, 2024

Lebanon begins forensic audit of central bank


Lebanon has begun a forensic audit of its central bank.

While disclosing this on Wednesday September 9, 2020, the Finance Ministry said the audit aimed to help the nation tackle its financial crisis.

The government agreed in July to hire turnaround specialist Alvarez and 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 public pressure following 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 rumors he would quit.

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