Alvarez & Marsal, the global accounting firm tasked with conducting a preliminary forensic audit on Lebanon's central bank, cited a lack of information from the Lebanese Ministry of Finance and the central bank itself as the reason for terminating its contract.
“In meetings held on November 4 and 5, the Ministry of Finance and Banque du Liban confirmed that the information A&M requested would not be forthcoming in the near future,” the auditing firm said in a statement on Thursday.
“Due to the insufficient provision of information, A&M is unable to complete its review and has formally notified the Ministry of Finance of its decision to terminate the engagement.”
The central bank, known as Banque du Liban, has cited banking secrecy laws dating back to the 1950s that prevent it from sharing the necessary information requested by the auditors.
The audit was supposed to look into how funds borrowed by the government from the central bank have been used over the years. The government also has separate agreements with KPMG and Oliver Wyman for accounting audits.
The Lebanese government engaged Alvarez & Marsal Middle East to provide consulting and advisory services, involving A&M conducting a preliminary forensic audit report on the activities and accounts of Lebanon’s central bank.
“In line with the engagement terms, A&M requested information to the necessary depth and detail sufficient to be able to undertake the review,” the auditing firm said.
However, the lack of access to data led the auditing firm on November 19 to withdraw from its agreement with the government.
The Lebanese economy is in a downward spiral after defaulting on about $31 billion of eurobonds in March. Its currency has plunged about 80 per cent against the US dollar in the black market and inflation surged to 131 per cent in September. Public debt reached $94.26bn as of the end of July with bank assets and deposits continuously declining.
The consolidated balance sheet of financial institutions in the country declined 14 per cent in the first nine months of the year from the same period in 2019.
A forensic look into accounts of the central bank is a key prerequisite for Lebanon to get international financial assistance to help it emerge from its worst economic crisis in three decades.
A&M said it “remains committed" to supporting its clients while maintaining "the utmost levels of integrity”.
It would still be available if the Lebanese government wishes to re-engage under “more conducive” circumstances for a successful completion of the mandate.
Lebanese President Michel Aoun has also criticised the lack of information from the central bank and earlier this week said a forensic audit was vital to combat corruption.
“The withdrawal of Alvarez & Marsal from the mission entrusted to it is a setback to statehood, disclosure, accountability, and transparency,” Mr Aoun said. “Forensic auditing is the gateway to every reform, because it is able to uncover sources of corruption and waste and the reasons for the current [economic] collapse and those responsible for it.”
In May, Lebanon turned to the International Monetary Fund for a $10bn bailout package, but talks have stalled due to political turmoil in the country. An agreement with the fund could trigger further pledges of investment that are dependent on the implementation of reforms.
The economy is expected to contract 25 per cent this year, according to IMF estimates.