UN rep slams Lebanon central financial institution chief over financial disaster

Beirut, Lebanon – United Nations Special Rapporteur on excessive poverty and human rights Olivier De Schutter on Friday blasted    Lebanese Central Bank Governor Riad Salameh for not recognizing the financial institution’s function within the nation’s crippling financial disaster.

“The role of commercial banks and the Central Bank [BDL] has been very problematic,” De Schutter instructed Al Jazeera.

For years, the central financial institution bolstered its international foreign money reserves – and enabled the federal government to spend past its means- by paying out exorbitant rates of interest to entice business banks to lend it US {dollars}.  In order to remain flush with {dollars}, business banks would in flip supply their depositors ever-higher rates of interest.

Many have likened the observe to a Ponzi scheme.

For his half, De Schutter mentioned it was unsustainable and the central financial institution ought to have identified that.

“The Central Bank should have entirely been much more alert to this, and it should have warned the government about this unsustainable scheme. The BDL has a responsibility to what has happened,” he mentioned.

On Friday, De Schutter wrapped up a 12-day mission to Lebanon through which he met with officers, residents, and consultants to evaluate the nation’s poverty state of affairs and the federal government’s response to assuaging it.

But he mentioned he couldn’t safe conferences with The Association of Banks in Lebanon (ABL), which represents the nation’s high business banks.

The Central Bank ought to have completely been far more alert

United Nations Special Rapporteur on excessive poverty and human rights Olivier De Schutter

“I request to meet with ABL, and we negotiated for days – and it was cancelled last minute by the president of ABL,” De Schutter mentioned. “I think ABL is now realizing they cannot continue to drive the country to the ground.”

Not solely has the banking sector been blamed for plunging the nation into an financial and monetary disaster that took maintain in October 2019 and has steadily worsened over two years, however it has additionally been accused of obstructing authorities efforts to mount a reputable monetary reform blueprint that may be a precondition for unlocking billions of {dollars} in desperately wanted monetary assist.

Talks with the International Monetary Fund hit the rocks in July 2020, after the Central Bank, business banks, and Parliament opposed the restoration plan championed by the federal government of former Prime Minister Hassan Diab.

De Schutter mentioned this “shows the disproportionate influence banks have on the political system in Lebanon”.

“We lost a year that could have been avoided, if the former financial recovery plan had not been blocked by ABL,” he added.

Lebanon’s business banks rejected previous authorities rescue plans, arguing that they’d be unfairly detrimental to the banking sector. They have additionally disagreed with the Finance Ministry’s and the IMF’s estimates of financial losses. Central Bank Governor Salameh has repeatedly rejected the notion that the Central Bank ran a Ponzi scheme, and has mentioned that his “conscience was clear” and he’s the sufferer of a  “campaign” being waged in opposition to him.

Downward spiral

The Lebanese financial system continues to spiral and continues to face shortages of onerous foreign money.

Three-quarters of Lebanon’s inhabitants is now living in poverty, the Lebanese pound has misplaced about 90 p.c of its worth in opposition to the US greenback, and far of public life has been paralyzed on account of energy cuts, staggering meals and gasoline inflation, and drugs shortages.

De Schutter, who described the nation’s disaster as “manufactured”, mentioned Lebanon’s drop in financial output – from $55bn in 2017 to about $33bn in 2020 – is “unprecedented in times of peace”.

The nation’s inflation price based on Bloomberg is among the many highest globally, exceeding Zimbabwe’s.

De Schutter mentioned at a press convention on Friday that Lebanon was “one of the most unequal countries on the planet”, and that it lacks viable social programmes, taxation insurance policies, and a long-term technique to alleviate poverty.

During his go to, he met with Prime Minister Najib Mikati, Central Bank Governor Riad Salameh, 9 ministers, consultants, humanitarian organizations, and residents throughout the nation.

“I saw scenes I never expected to see in a middle-income country,” he mentioned, as he recalled assembly a girl in Tripoli who mentioned she “wished she were an animal”.

Unfortunately, I heard no credible poverty alleviation plan from the federal government that doesn’t depend on worldwide donors and non-governmental organizations

United Nations Special Rapporteur on excessive poverty and human rights Olivier De Schutter

“With the wealth this nation has, the excessive stage of training it could boast … that’s merely unacceptable, that’s certainly unprecedented, and to me, this was an enormous shock.

“Unfortunately, I heard no credible poverty alleviation plan from the government that does not rely on international donors and non-governmental organizations,” De Schutter mentioned. “Worryingly, political leadership seems unwilling to see the relationship between tax reform and poverty alleviation and underestimates the benefits of social protection systems for rebuilding the economy…”

De Schutter mentioned that politicians usually blamed Syrian refugees for the nation’s financial disaster, which he described as an “extremely worrying trend”.

The UN skilled mentioned that Lebanon is “not yet a failed state”, however dangers turning into one as extra youngsters drop out of faculty and extra individuals go away the nation for higher job alternatives.

“The resources are there if only it were mobilized in the public interest,” he mentioned.

Special rapporteurs are impartial consultants appointed by the UN Human Rights Council.

The worldwide neighborhood continues to offer humanitarian assist to Lebanon, however has withheld billions in developmental assist till the nation reforms its sluggish financial system, mired in wasteful spending and corruption. The laundry checklist of reforms consists of restructuring the electrical energy sector, conducting a forensic audit of the central financial institution and state establishments, implementing an anti-corruption technique, and making the nation’s judiciary financially and administratively impartial of the federal government.