BEIRUT – The Lebanese government has appointed asset manager Karim Souaid as the new governor of the central bank in an effort to overhaul the country’s struggling economy. This decision comes amid the aftermath of prolonged conflict and ongoing allegations of corruption and financial mismanagement.
Lebanon’s economic woes have been unrelenting for the past five years, exacerbated by a 14-month conflict with Israel involving Hezbollah. The World Bank has estimated damages and losses amounting to $11 billion due to this conflict. The appointment of Souaid was made public by Prime Minister Nawaf Salam, a jurist at the International Court of Justice. He assumed the role of premier in January after President Joseph Aoun took office.
The selection of Souaid as central bank governor was endorsed by a significant majority within Lebanon’s reformist Cabinet, despite Prime Minister Salam abstaining from the decision. “The Lebanese have demanded reforms, and we are committed to delivering them,” Salam stated post the government meeting.
Souaid’s background includes a stint as a senior executive at HSBC. His views on economic reform align closely with those of Lebanon’s banking sector, leading to concerns among critics who fear he may move to liquidate state assets to support the banks.
The economic landscape in Lebanon has been plagued by issues ranging from an inefficient economy to rampant corruption, which depleted state resources and triggered a banking crisis in 2019. Adding to these troubles were the COVID-19 pandemic, the catastrophic Beirut Port blast in August 2020, and the protracted conflict with Israel, all of which severely impacted economic stability.
Currently, Lebanon operates on a cash economy, heavily reliant on private electricity providers, driving inflation and plunging nearly half the population into poverty, according to the World Bank. A deal with the International Monetary Fund remains elusive as key reforms are required to access much-needed aid. These include eradicating wasteful practices, curtailing corruption, revamping the banking sector, and addressing financial crimes.
Commercial banks in Lebanon have shown reluctance towards implementing these reforms, fearing they will bear the brunt of the country’s substantial financial losses. They argue that the burden should fall more on the state, given its history of fiscal irresponsibility and defaulting on its debt obligations in 2020.
While President Aoun supported Souaid’s appointment, Prime Minister Salam, along with several ministers, voiced reservations. “Karim Souaid was not my preference, and some ministers shared my concerns regarding depositor rights,” Salam said, highlighting worries over the potential inability to return large bank deposits. “He will need to adhere to our reform-focused financial policies.”
Souaid’s predecessor, Riad Salameh, concluded his 30-year tenure as central bank governor mired in controversy, facing multiple international corruption charges. Appointed in 1993 to help Lebanon recover post-civil war, Salameh was initially celebrated for stabilizing the nation’s currency and managing inflation amidst conflict but ultimately seen as a contributor to Lebanon’s financial collapse.