After an unprecedented 30-year term, Riad Salameh’s governorship at Banque du Liban (BDL), Lebanon’s central bank, has come to a tarnished end amid allegations of money laundering, fraud, and embezzlement of public funds. His tenure, which began in 1993 at the request of then-Prime Minister Rafic Hariri, has come to a tarnished end, leaving the country with one of the worst economic crises in modern history.
Salameh’s initial tenure was marked by efforts to rebuild Lebanon’s banking sector after the civil war, financing the reconstruction of destroyed cities, and attracting funding and Lebanese expatriates who had fled the conflict. Offering high interest rates, he managed to attract deposits and remittances from the Lebanese diaspora and wealthy Arabs, earning him praise.
However, in 2011, his strategy started showing cracks as remittances and foreign investment slowed. Political protests and the outbreak of civil war in neighboring Syria further destabilized the country, leading to unsustainable spending and a financial engineering program launched in 2016. This program, aimed at maintaining foreign currency reserves by offering high returns on US dollar deposits, was considered a “Ponzi scheme” by the World Bank.
Lebanon’s financial system eventually collapsed in 2019, exacerbated by a popular uprising, spooked foreign investors, and banks running out of dollars to pay depositors. The pandemic and the explosion at the Beirut port worsened the situation, resulting in the rapid depreciation of the Lebanese lira.
Critics argue that Salameh failed in his central banking duties, which include preserving currency and banking sector stability. The IMF pointed out that the central bank’s operations, such as subsidies on various sectors, should have been handled by the government, but Salameh’s support from politicians and banks allowed him to remain in power for so long.
In addition to the economic disaster, Salameh has been facing charges of money laundering, fraud, and embezzlement totaling $330 million in Lebanon and abroad. Interpol has issued red notices against him at the request of France and Germany, where he is being investigated for various financial crimes.
Despite the mounting legal challenges, Salameh remained in power due to political protection from Prime Minister Najib Mikati. The lack of political will for reforms has further hindered Lebanon’s prospects for economic recovery, making it unlikely for people to return unless significant changes are made to the country’s governance and economic policies. As Salameh faces legal battles overseas, he will likely stay in Lebanon, as the country does not allow extradition.
With Salameh’s term ending, Wassim Mansouri, the former first deputy governor of BDL, has taken over as acting head of the central bank. Lebanon’s financial situation remains precarious, and Mansouri has vowed to stop financing the government outside legal frameworks, call for the liberalization and unification of the exchange rate, and implement sweeping reforms to rebuild the banking sector and stabilize the economy.
However, many are skeptical about the effectiveness of these measures without genuine political reform and political will. Lebanon’s economic recovery depends on implementing meaningful changes and breaking the cycle of corruption and mismanagement that has plagued the country’s financial system for decades.
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