Lebanon’s former central bank governor cost country $7.7bn, report says

Lebanon’s former central bank governor cost country $7.7bn, report says
Riad Salameh, Lebanon's central bank governor, attends an interview with Reuters in Beirut, Lebanon February 15, 2010. (File/Reuters)
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Updated 11 August 2023
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Lebanon’s former central bank governor cost country $7.7bn, report says

Lebanon’s former central bank governor cost country $7.7bn, report says
  • Salameh ‘monopolized’ decisions, discussions
  • Ex-governor faces US sanctions, arrest warrants in Europe

BEIRUT: A preliminary forensic audit of Lebanon’s central bank by professional services firm Alvarez & Marsal has painted a damning picture of the institution under former Governor Riad Salameh.

Caretaker Finance Minister Youssef Khalil presented copies of the report on Banque du Liban to caretaker Prime Minister Najib Mikati, Parliament Speaker Nabih Berri and other lawmakers on Friday.

It comprises 332 pages in 14 sections and details complex accounting, banking and administrative operations.

The report comes after the US Treasury on Thursday announced sanctions on Salameh, as well as his son Nadi Salameh, brother Raja Salameh, assistant Marianne Howayek and friend Anna Kozakova.

Salameh was still in office when Alvarez & Marsal won the audit contract in 2021. He stepped down last month.

The report said that the financial engineering conducted by the former governor was “highly costly, with a total cost of 115 trillion Lebanese pounds ($7.7 billion) between 2015 and 2020.”

The balance sheet did not show any losses, according to the report. Instead they were recorded under the categories of “other assets” and “clearance and settlement accounts.”

No explanation was provided for the payment of interest to major depositors and borrowers.

The central bank resorted to issuing bonds and printing money, resulting in increased government spending and causing an inflation issue that affected its ability to stabilize the rate of change, the document said.

In its preliminary findings, the report revealed that transfers to the account of Forry Associates Ltd. — owned by Raja Salameh and the subject of European judicial inquiries into possible corruption — totaled $333 million, including $111 million in illegal transfers.

Civil movements have blamed Lebanon’s economic collapse since 2019 on the failure of successive governments and the financial engineering pursued by Salameh.

The report said that the value of loans granted by the central bank totaled 15 trillion Lebanese pounds and that 23 individuals, entities and associations had unjustly benefited from financial support exceeding $100,000 each between 2015 and 2020.

As a result of the unconventional standards adopted by the central bank and its manipulation of accounts, its deficit rose to 77 trillion Lebanese pounds in 2020, the report said.

It said also that while the bank had a foreign currency surplus of $7.2 billion at the end of 2015, by the end of 2020 that had become a deficit of $50.7 billion.

The rapid deterioration of the bank’s financial situation was not reflected in its balance sheet and financial statements, as its use of unconventional accounting standards allowed it to exaggerate the value of its assets and profits, the report said.

The document also revealed minutes from a meeting of the bank’s central council that showed how Salameh shaped monetary policy, established accounting standards that concealed accumulated losses, and determined which banks would benefit from loans and financial engineering.

Members of the central council did not challenge those decisions or oversee the related details, it said.

The report said that the unconventional policies applied by the central bank included: “Deferral of interest costs to increase profitability; creation of seigniorage balances to offset part of the deferred costs of matured CDs and pain coupons on outstanding instruments to increase profitability; overstating the carrying value of the Lebanese treasury bills by not recognizing the impairment in their value; recording of unrealized appreciation/(depreciation) of gold balance sheet resulting in understatement/(overstatement) of assets and equity; offsetting the Ministry of Finance’s US dollar overdraft liability to the central bank against treasury LBP deposits resulting in an understatement of both assets and liabilities; and offsetting the loans and deposits under leverage agreements resulting in an understatement of both assets and liabilities.”

The report also addressed the attraction of foreign deposits and their conversion into local assets. It found that a substantial portion of foreign currency assets were, in reality, local assets and said that if these amounts were to be returned, they would exert immense pressure on the Lebanese state, people and economy.

The report said that at the end of each year, the governor directed the accounting department to offset financial transaction expenses. Consequently, the financial data released did not accurately portray the bank’s true financial position.

“The positions and losses of BDL are presented through netting of assets and liabilities and through recording them in unexplained and general accounts such as ‘other assets’ and ‘clearance and settlement accounts,’” the report said.

“No loss is shown at all in the balance sheet,” it added, noting that no information was provided to the public, such as profit and loss accounts from 2015 to 2020, interest paid to major depositors or granted to major borrowers, or the methodology for reporting those interests.

Also, details such as deposit segmentation were withheld, as were the costs of financial engineering and related decisions, the report said.

Instead, the central bank resorted to monetization to increase the supply of the Lebanese pound, leading to an increase in the country’s overall expenditure.

The report said that central banks might sometimes engage in such activities, but an increase in those operations created an inflation problem and affected the ability to stabilize the exchange rate.

It said the central bank also used financial engineering to keep US dollars within the banking system but once the phase of exchange rate stabilization ended, the approach of profiting from monetization became unconventional and unstable.

The rise in the value of the Lebanese pound led to economic growth, especially in sectors that earned profits in foreign currency, the report said.

The use of monetization was not entirely prudent and not disclosed to the public, it said.


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.