Lebanon appoints Souaid as central bank governor amid dispute

According to the Moroccan government-friendly Ataylar, Lebanon elected a new central bank governor, sparking the first public disagreement between President Michel Aoun and Prime Minister Nawaf Salam over government policies.

Lebanon’s cabinet agreed to appoint asset manager Karim Souaid as the governor of the central bank, a crucial position for implementing the economic reforms demanded by the international community.

However, the appointment was met with objections from the Prime Minister, who asked Souaid to commit to the government’s reform agenda in a country suffering from a five-year economic collapse, widely attributed to official mismanagement and corruption.

Salam expressed reservations about Souaid’s appointment but provided no details, other than citing his “desire to protect the rights of depositors and preserve state assets.”

He also indicated that Souaid “must adhere from today to the reformist policies of the government and negotiate a new programme with the International Monetary Fund, restructure the banks, and present a comprehensive plan to protect the rights of depositors.”

Lebanese analysts have highlighted Souaid’s close ties to the failing banking sector and to members of Lebanon’s entrenched ruling class, leading some experts to be sceptical of his reformist credentials.

Born in 1964, Souaid officially took up the post after the term of former governor Riad Salameh expired in July 2023, with no successor appointed.

Divided politicians have since failed to agree on a permanent replacement for Salameh, who has been accused both domestically and internationally of financial crimes.

The first deputy governor, Wassim Mansouri, had been serving as acting head of the central bank, a post traditionally reserved for a Maronite Christian in Lebanon’s sectarian system of shared governance.

Souaid is the founder and managing partner of Gulf-based Growthgate, according to his biography on the private investment firm’s website.

He claims to have previously worked in financial institutions such as HSBC and has been involved in privatisation initiatives in several Arab countries.

The Beirut-based think tank Policy Initiative issued a statement on March 26th saying that the nomination of the central bank governor would be a test of the new government’s commitment to genuine reform.

“The next governor will shape Lebanon’s urgent reform agenda, serve as the main counterpart to the International Monetary Fund, and participate directly in sovereign debt restructuring negotiations alongside the Ministry of Finance,” it said.

Lebanon’s new authorities must implement the reforms demanded by the international community to unlock bailout funds.

The ongoing economic crisis, which has persisted since 2019, has caused the local currency to lose most of its value against the dollar, plunging a large part of the population into poverty and leaving many without access to their savings.

Salam also announced that the cabinet approved a bill on March 27th aimed at modifying legislation related to bank secrecy.

In April 2022, Lebanon and the IMF reached a conditional agreement on a $3 billion loan package, but the painful reforms required by the 46-month financing programme have yet to be implemented.

Earlier this month, the IMF welcomed the new Lebanese government’s request for support in addressing the country’s severe economic challenges.

In February, it stated that it was open to a new loan agreement following talks with the recently appointed finance minister.

Souaid studied law at Saint Joseph University in Lebanon and at Harvard Law School in the United States, according to his biography.

Reuters reported earlier this month that the US had been involved in the selection of the new central bank governor for Lebanon.

US officials are said to have interviewed several candidates, asking them questions about how they would combat the financing of terrorism through Lebanon’s banking system and whether they would be willing to confront Hezbollah.

The governor of Lebanon’s central bank is appointed by a cabinet decree for a six-year term, which may be renewed multiple times, based on the finance minister’s recommendation.

Atayalar. Maghrebi. Reuters