Can new central bank chief kick off Lebanon’s long-awaited economic transformation?

Special Can new central bank chief kick off Lebanon’s long-awaited economic transformation?
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Among the many people who have held protests outside the headquarters of Lebanon’s central bank office in Beirut this year are retired soldiers, who demanded inflation adjustments to their pensions on March 30, 2023. (AFP file)
Special Can new central bank chief kick off Lebanon’s long-awaited economic transformation?
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Lebanon's central bank headquarters in Beirut. (AFP/file photo)
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Updated 03 August 2023
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Can new central bank chief kick off Lebanon’s long-awaited economic transformation?

Can new central bank chief kick off Lebanon’s long-awaited economic transformation?
  • Wassim Mansouri has daunting task of establishing new rules for monetary dealings between government and central bank
  • Amid Lebanon’s political deadlock, there is no guarantee he will succeed where the outgoing governor Riad Salameh failed

BEIRUT: Wassim Mansouri, the first vice governor of Banque du Liban, Lebanon’s central bank, assumed the responsibilities of former governor Riad Salameh on Monday, ushering in a period of cautious optimism and sparking hopes of a belated return to fiscal responsibility.

Amid the worst financial crisis in the country’s history, made worse by years of asset stripping by the nation’s political elite, Mansouri faces the daunting task of restoring the credibility of the long-abused central bank.

“It is necessary to put an end to the policy of government borrowing from the central bank and limit the process to matters of emergency only, and for a limited period of time, provided that it is legalized,” Mansouri said on his first day in office.




Wassim Manssouri, Lebanon's acting central bank governor, speaks during a press conference at the bank's headquarters in Beirut on July 31, 2023. (AFP)

This was his attempt to establish new rules for monetary dealings between the government and the central bank, to bring fiscal policy back in line with Lebanon’s Code of Money and Credit, which was established in 1963.

Mansouri aims to secure legal and legislative cover for his conditions, from both the executive and legislative authorities, to continue financing the government while exempting himself from the possibility of any subsequent responsibility.

He called for the implementation of fiscal reforms within six months, which should include approval of the budget for 2023-24, the adoption of capital controls, a restructuring of banks, and enforcement of financial discipline.

Financial markets reacted positively to the news of Salameh’s departure after a checkered 30-year stint. The value of the US dollar fell against the Lebanese pound, dropping from 99,000 to 88,500 in the week before he stepped down.




Lebanon's failed former central bank governor Riad Salameh. (AFP file photo)

It feels like a breath of fresh air has just blown from a hole that has opened suddenly in a thick, impenetrable wall that was built between the central bank and literally the whole world,” George Kanaan, CEO of the Arab Bankers Association, told Arab News.

“Suddenly we are told that he is willing to provide statistics, he is willing to work with the government, he is willing to inform the parliament, he is willing to discuss things, he wants matters legalized under proper legislation to allow him to work.

“(This is) nothing like the old times. This is a great new beginning. The question, though, is what needs to follow immediately? The answer is a series of reforms, starting with legislative reforms. And then we can begin to see how the crisis will eventually come to an end.

“However, there is a reason why they have been blocked, as the political class in Lebanon does not see that they are necessary, or they believe that, if implemented, the reforms will harm them. And in that case the spring will be short lived.”

Indeed, there is no guarantee that Mansouri will succeed. There is no proposed law that would allow the central bank to lend money to the state in a way that provides legislative cover. And there is no indication of the possibility of a parliamentary session to pass such draft legislation.

Caretaker Prime Minister Najib Mikati has not presented a draft law that would allow the government to borrow foreign currencies from the bank. According to local media reports, he hesitated to do so “due to its unlawfulness,” putting the ball in parliament’s court.

The policy of lending by the central bank to the state has been a fundamental cause of the depletion of monetary reserves and the collapse of Lebanon’s once-flourishing banking and financial sectors, compounded by the government’s failure to implement reforms and curb waste and corruption.

The government is currently seeking a loan of up to $1.2 billion over six months to cover the salaries of public sector, military and security personnel, the cost of essential imports, and interventions in the market when necessary.

Can Mansouri succeed where Salameh failed? The government is in prolonged caretaker mode and the parliament remains deeply divided, making it difficult to pass any legislation that might prove controversial. Meanwhile, the central bank’s reserves, according to financial references, now stand at only between $9 billion and $10 billion.

Parliament is split into factions, including the Lebanese Forces, the Lebanese Kataeb, reformist MPs, and some independent MPs, who refuse to pass laws in the absence of a president. The president’s office has been vacant since Michel Aoun’s term ended in October last year as the parliament cannot agree on a successor. They will therefore likely boycott the legislative session if it is scheduled.




The Lebanese pound has plumbed new depths against the US dollar. (AFP file photo)

Some factions, such as the Free Patriotic Movement, have set conditions for attending sessions, while others, notably the Amal movement and Hezbollah, have shown little enthusiasm for them at all.

Asked whether Mansouri will be able to enact change, given this state of political paralysis, Kanaan noted that the new governor does have allies who want him to succeed.

“He is not alone,” Kanaan said. “There are a lot of people who support him. On his own he cannot do it. On his own, he and the other vice governors will probably be forced to leave if they insist on the reforms.

“I think there are other parties in Lebanon, but not necessarily political bodies, that want the reforms done. Certainly, the whole word outside of Lebanon is crying out for those reforms. Everybody wants those reforms.

“Lebanon right now is witnessing a flow of liquidity and a positive economic atmosphere, which is pointing in an upward direction, and that releases pressure for reforms. Everybody would say, if things are going okay, why do we need reforms since things will eventually go in the right direction without the need of those reforms. And this would be unfortunate.”




Retired servicemen clash with soldiers outside Lebanon's central bank during a demonstration demanding inflation-adjustments to their pensions, in Beirut on March 30, 2023. (AFP)

Mansouri has been cautious during his first few days in office and has refrained from making any further statements to the media, leaving time for “action,” as members of his entourage put it. But this means it is hard to predict what the ultimate outcome will be.

Fadi Khalaf, the secretary-general of the Association of Banks in Lebanon, told Arab News: “It is too early to comment on the policy that the central bank’s deputy governor intends to pursue. We are currently in a monitoring and waiting phase.”

Regarding the legacy of Salameh, whose term as governor was renewed four times between the era of the late President Elias Hrawi and that of Aoun, there is no denying he enjoyed the support of most political factions.

Despite his constant objections to policies adopted by the ruling political elite, he continued to cover the Lebanese state’s deficits and operating expenses.

One of the biggest expenses borne by the central bank was the cost of electricity generation, which ran as high as $2 billion annually. The money was handed over in the form of treasury advances that went to the Ministry of Energy, without ever being paid back to the bank.




A woman stands with a sign during a protest by the Depositors Solidarity Union group protesting against the Lebanese Central Bank's monetary policies outside the bank's headquarters in Beirut on June 23, 2023. (AFP)

This prompted Salameh to halt the process in 2020. The electricity sector continues to be the biggest burden on the bank’s mandatory reserve, as well as on the already empty state treasury.

Although the conflict and crisis in neighboring Syria created tough economic challenges for Lebanon, Salameh’s financial legerdemain shielded the country from many of the repercussions, until the financial crisis of 2019 struck.

This brought about the unraveling of the banking sector and the deterioration of the dollar-exchange rate, in a crisis that grew worse when former Prime Minister Hassan Diab’s government defaulted on Lebanon’s foreign debt in 2020.

One banking expert, who spoke to Arab News on condition of anonymity, believes that borrowing “will continue, whether directly or in accordance with the law,” largely continuing Salameh’s legacy.

“(The central bank’s) dollars will go to the state’s expenditure items, but what is required is improvement of the state’s finances and rationalization of spending of dollars,” the expert said.

Mansouri’s window of opportunity for implementing meaningful change is small.

“Not very long — I would say it is a matter of weeks,” said Kanaan.

“In a few weeks’ time, he either makes a step in the right direction, accompanied by all sorts of other reforms, and then we are making real headway in the right direction. Or he leaves. That’s the second alternative. Or he buckles and performs his duties just like Riad was doing before him.”

 


Egypt condemns Israeli human rights violations in Gaza Strip

Egypt condemns Israeli human rights violations in Gaza Strip
Updated 6 sec ago
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Egypt condemns Israeli human rights violations in Gaza Strip

Egypt condemns Israeli human rights violations in Gaza Strip
  • Egypt said it condemned violations of international law including the targeting of civilians
  • Abu Zeid reiterated the need for immediate intervention by the international community to stop such violations

CAIRO: Egypt has condemned the repeated Israeli violations of international law and international humanitarian law in the Gaza Strip.
The Egyptian Ministry of Foreign Affairs said: “It is regrettable and shameful that violations of international law and humanitarian values continue in such a flagrant manner in the 21st century, in full view and hearing of all countries, international organizations, and the Security Council.”
This came during statements made by ministry spokesman Ahmed Abu Zeid regarding the discovery of mass graves in the Nasser Medical Complex in Khan Yunis in the southern Gaza Strip.
Egypt said it condemned violations of international law including the targeting of civilians, displaced persons, and medical teams by Israeli forces.
Abu Zeid reiterated the need for immediate intervention by the international community to stop such violations and to conduct the necessary investigations to hold perpetrators accountable.
He added that the killing, destruction, and violence witnessed in the West Bank over the past few weeks is no less dangerous, further aggravates the crisis, and threatens to escalate tensions across all occupied Palestinian territories.
He called for an immediate halt to the violence and attacks by settlers, protected by Israeli forces, against Palestinian civilians, their property, and homes in the West Bank.
The bodies of over 200 Palestinians, including patients, have been uncovered so far in mass graves at the Nasser Medical Complex in Gaza’s Khan Younis since Saturday, according to media reports.


Hezbollah drones target northern Acre in response to Israeli strikes on Lebanese group

Hezbollah drones target northern Acre in response to Israeli strikes on Lebanese group
Updated 11 min 3 sec ago
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Hezbollah drones target northern Acre in response to Israeli strikes on Lebanese group

Hezbollah drones target northern Acre in response to Israeli strikes on Lebanese group
  • Israeli media reported that “those present on the beach were evacuated after a Hezbollah drone was intercepted in the skies over Nahariyya and Acre”
  • Israeli army had said it killed “two significant terrorists in Hezbollah’s aerial unit”

BEIRUT: Hezbollah forces in south Lebanon on Tuesday launched a combined aerial attack with diversionary and assault drones on Israeli military targets.

The focus of the Lebanese group’s attack was the headquarters of the Golani Brigade at the Shraga barracks, north of the city of Acre.

The attack was described as “a new qualitative strike against an Israeli site,” using drones said to be able to bypass Israeli radar and avoid Iron Dome missiles.

A security source told Arab News that the attack was “a sensitive targeting.” The area struck is more than 15 km from the border with Lebanon.

“This targeting took place in broad daylight while the Israelis were celebrating the Jewish Passover,” the source said.

Hezbollah said it launched the drones “in response to Israeli aggression against the Lebanese town of Aadloun and the assassination of a (Hezbollah) cadre there.”

Videos on social media showed explosions and smoke rising north of the coastal city of Acre, with beachgoers fleeing in all directions.

Israeli media reported that “those present on the beach were evacuated after a Hezbollah drone was intercepted in the skies over Nahariyya and Acre.”

A few hours after Hezbollah’s strike, Israeli warplanes carried out an airstrike on the town of Hanin, 7 km north of Bint Jbeil. It destroyed a two-story family house.

Initial reports said there were two casualties, including a woman, and five were wounded, some seriously, including women and children. The injured were transferred to hospitals.

Meanwhile, an Israeli military drone struck a car between the towns of Adloun and Al-Kharayeb, killing Hussein Ali Azqul, who reports suggested was an engineer working in Hezbollah’s air defense unit.

The group was left mourning a second member, Mohammed Khalil Attiya, from Qana, who died from injuries received a few days ago. The Israeli army described him as a “leader in the Radwan Force (a Hezbollah special unit).”

In ongoing cross-border clashes between Hezbollah and Israeli forces, the former said it had attacked “a gathering of Israeli enemy soldiers in the vicinity of Al-Asi,” to which Israeli fighter jets retaliated with airstrikes on the towns of Blida and Hula.

Israeli airstrikes continued relentlessly on Tuesday night, striking Yaroun and Al-Aishiya as well as other districts in south Lebanon.

The Israeli military also launched flash bombs over villages in the western and central areas, extending to the outskirts of Tyre, and on Tuesday morning fired heavy weapon rounds toward the towns of Naqoura and Jabal Al-Labouneh.

 


Houthi threats continue but attacks on ships in Red Sea appear to be on hold

Houthi threats continue but attacks on ships in Red Sea appear to be on hold
Updated 30 min 19 sec ago
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Houthi threats continue but attacks on ships in Red Sea appear to be on hold

Houthi threats continue but attacks on ships in Red Sea appear to be on hold
  • Observers speculate the militia might be running out of drones and missiles, or air strikes by US and UK could have damaged launchers
  • Houthis have claimed credit for significantly fewer assaults this month and international marine agencies have reported a decline in the number of strikes

AL-MUKALLA: Despite ongoing threats by Houthi leaders in Yemen that they will continue to attack international shipping in the Red Sea, the number of strikes on vessels has drastically fallen in recent weeks.

The group has not claimed credit for any assaults on ships since April 10. Analysts speculate that the militia might be running out of missiles and drones, or air strikes on Houthi targets by the US and UK could have damaged their launchers.

Since November, the Houthis have launched hundreds of drones, ballistic missiles and remotely controlled and explosive-laden boats at international commercial and naval ships in the Red Sea, Bab Al-Mandab Strait and the Gulf of Aden. They say they are acting in support of the Palestinian people and the aim is to force Israel to allow more humanitarian aid to enter the Gaza Strip.

Compared with the early days of their campaign, the Houthis have claimed credit for significantly fewer assaults this month, and international marine agencies have reported a decline in the number of strikes.

The organization UK Maritime Trade Operations, which records attacks on shipping, has not received any notifications of incidents in the Red Sea or Gulf of Aden since April 7, one of the longest periods with no reported attacks since the start of the Houthi campaign almost six months ago.

The US Central Command last reported intercepting Houthi missiles and drones on April 16. Prior to that it had been issuing almost daily notifications.

Despite the decline in attacks on shipping, the Houthis’ Political Office said on Monday it had instructed its military forces to escalate attacks in the Red Sea and Arabian Sea on ships linked to or bound for Israel in response to what it described as “genocide crimes” committed by Israel against Palestinians in Gaza.

Mohammed Al-Basha, an expert on the Middle East with the Navanti research group in the US, cautioned that the recent extended period without any claims of attacks does not necessarily mean the Houthis have halted their attacks in the Red Sea.

“The absence of frequent daily claims could also represent a strategic decision or the possibility of diplomatic or secret talks, rather than an operational inability,” he wrote in a message posted on social media platform X.

“This might suggest that the missile stockpile of the Houthis is diminishing, while the production of drones remains steady.”

Yemeni military analyst Brig. Gen. Mohammed Al-Kumaim suggested airstrikes in recent months by US and UK forces might have diminished the capability of the Houthis to launch attacks, and said the group might be settling into a war of attrition.

“The US may have targeted the few mobile missile launchers belonging to the Houthi militia; they need three or four launchers if they have 100 missiles,” he told Arab News.

The UN’s special envoy for Yemen, Hans Grundberg, said on Monday he held talks with Houthi negotiator Mohammed Abdul Sallam and Omani officials in Muscat to explore ways in which to advance a UN-brokered peace plan for Yemen while also reducing wider tensions in the Middle East.

Abdul Aziz Al-Bukair, a Houthi government minister of state, said the militia’s representatives discussed with Grundberg their recent negotiations with Saudi authorities, as well as issues such as payment of wages to public-sector workers, the reopening of key roads in Yemen, and oil exports.

The ongoing, UN-led peace efforts to end the near decade-long war in Yemen suffered a severe blow when the Houthis began attacking ships in the Red Sea in November.


Iran threatens to annihilate Israel should it launch a major attack

Iran threatens to annihilate Israel should it launch a major attack
Updated 56 min 29 sec ago
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Iran threatens to annihilate Israel should it launch a major attack

Iran threatens to annihilate Israel should it launch a major attack
  • Explosions were heard over Iran’s Isfahan city Friday in possible Israeli attack
  • But Tehran played down the incident and said it had no plans for a retaliation

DUBAI: An Israeli attack on Iranian territory could radically change dynamics and result in there being nothing left of the "Zionist regime", Iran's President Ebrahim Raisi was quoted as saying on Tuesday by the official IRNA news agency.
Raisi began a three day visit to Pakistan on Monday and has vowed to boost trade between the neighbouring nations to $10 billion a year.
The two Muslim neighbours are seeking to mend ties after unprecedented tit-for-tat military strikes this year.
On Friday, explosions were heard over the Iranian city of Isfahan in what sources said was an Israeli attack, but Tehran played down the incident and said it had no plans for retaliation.
Iran launched a barrage of missiles and drones at Israel on April 13 in what it said was retaliation for Israel's suspected deadly strike on its embassy compound in Damascus on April 1, but almost all were shot down.
"The Islamic Republic of Iran will honourably continue to support the Palestinian resistance," Raisi added in the speech in Lahore.


Norway calls on donors to resume funding to Palestinian UNRWA agency

Norway calls on donors to resume funding to Palestinian UNRWA agency
Updated 23 April 2024
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Norway calls on donors to resume funding to Palestinian UNRWA agency

Norway calls on donors to resume funding to Palestinian UNRWA agency
  • Norway, also a major donor to the organization, argued that funding cuts put the population of Gaza at risk
  • “I would now like to call on countries that have still frozen their contributions to UNRWA to resume funding,” Norway’s foreign minister Espen Barth Eide said

OSLO: Norway called on international donors on Tuesday to resume payments to the UN agency for Palestinians refugees (UNRWA) after a report found Israel had yet to provide evidence that some UNRWA staff were linked to terrorist groups.
The United States, Britain and others earlier this year paused payments to UNRWA following Israel’s claims, while Norway, also a major donor to the organization, argued that funding cuts put the population of Gaza at risk.
A review of the agency’s neutrality led by former French foreign minister Catherine Colonna on Monday concluded Israel had yet to back up its accusations that hundreds of UNRWA staff were operatives in Gaza terrorist groups.
“I would now like to call on countries that have still frozen their contributions to UNRWA to resume funding,” Norway’s foreign minister Espen Barth Eide said in a statement.
A separate investigation by internal UN investigators is looking into Israeli allegations that 12 UNRWA staff took part in the Hamas-led Oct. 7 attacks which triggered the Gaza war.
“Norway has emphasized that it is unacceptable to punish an entire organization, with 30,000 employees, and all Palestine refugees for the alleged misdeeds of a small number of the organization’s employees,” Barth Eide said.
While 10 countries have since ended their suspensions, the United States, Britain, Italy, the Netherlands, Austria and Lithuania have not. A UN spokesperson on Monday said UNRWA currently had enough funding to pay for operations until June.