Lebanon in limbo after auditors terminate agreement over lack of access to data
An audit of the country's central bank is critical to securing aid from the International Monetary Fund and other organisations and countries
Alvarez & Marsal, the auditing firm tasked with assessing the financials of Lebanon’s central bank, terminated its contract because it was not able to acquire needed information, the outgoing finance minister said. The audit is an important prerequisite for the country to obtain international assistance to help it emerge from its worst economic crisis.
“They sent us a letter the day before yesterday and informed us they were terminating the contract,” outgoing finance minister Ghazi Wazni told The National by phone from Beirut on Saturday.
“They said they were unable to obtain the necessary information to allow them to carry out their work and are not hopeful that they will be able to get additional information in the coming three months to carry on with their work.”
Alvarez & Marsal declined to comment.
Last month, the government extended the contract with the auditing company by three months. The central bank, known as Banque du Liban, has cited banking secrecy laws that prevent it from sharing all the necessary information requested by the auditors. The audit is supposed to show how funds borrowed by the government from the central bank have been used. The government also has separate agreements with KPMG and Oliver Wyman for accounting audits.
Lebanon faces its worst economic crisis in three decades, 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, which have traditionally been the backbone of Lebanon’s economy, declined 14 per cent in the first nine months of the year from the same period in 2019.
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 country’s economy continued to deteriorate in October, following a devastating blast at Beirut’s port and as prime minister designate Mustapha Adib stepped down after failing to form a new government.
The Blom Lebanon PMI index, a measure of the strength of the country's private sector, showed firms recorded another marked contraction in output in October. The gauge edged up slightly to 43.3 last month from 42.1 in September. A reading above 50 denotes economic expansion and one below 50 represents a contraction.
The economy is expected to contract 25 per cent this year, according to IMF estimates.
Last month, former prime minister Saad Hariri was designated by Lebanon's president Michel Aoun to form a government to tackle the country's economic woes.
This is the fourth time Mr Hariri, 50, has been named to the post. His father Rafik Hariri served as prime minister five times, and is credited with rebuilding the country after the end of a 15-year civil war in 1990.
Updated: November 21, 2020 07:35 PM