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Abu Dhabi, UAEMonday 1 March 2021

Lebanon's Bahaa Hariri calls for central bank audit and technocratic government

The eldest son of former prime minister Rafik Hariri said an investigation needs to run its course before anyone can pass judgment on the central bank governor

Two Lebanese flags in Martyrs' Square, in downtown Beirut near the port explosion, which has exacerbated the economic woes of the country. EPA
Two Lebanese flags in Martyrs' Square, in downtown Beirut near the port explosion, which has exacerbated the economic woes of the country. EPA

The eldest son of former prime minister Rafik Hariri said a forensic audit of Lebanon’s central bank needs to take place before any judgment can be made about the regulator’s governor Riad Salameh, who is at the centre of the country’s worst economic crisis.

“In the global justice system, you are not guilty, you are innocent until you are proven guilty. We need the transparency of the central bank’s statements. Where did the money go?” Bahaa Hariri said from London in an interview with The National. “We need a proper audit from a global auditing firm that tells us exactly what happened and then we put that in front of us and make the call.”

On Tuesday, Lebanon’s caretaker finance minister Ghazi Wazni hired Alvarez & Marsal to carry out forensic auditing and KPMG and Oliver Wyman to perform other accounting and financial assessments.

“We have to be very careful. You never judge until you have all the data. There are many questions that need to be answered,” Mr Hariri said when asked if Mr Salameh was being scapegoated by the ruling political class of Lebanon, to mollify public anger that is demanding an end to the country’s dysfunctional sectarian system and accountability for the nation’s indebtedness.

Mr Salameh, 70, a veteran banker of Merrill Lynch, previously managed the wealth of the late Rafik Hariri and has been at the helm of the regulator since 1993.

Lebanon, whose public debt reached $93.4 billion (Dh343bn) at the end of June, is facing its worst economic crisis since its independence in 1943 and the Beirut port explosion last month has compounded its economic woes. The country’s economy is projected to shrink 24 per cent this year, compared with an earlier forecast of 15 per cent before the blast, according to the Institute of International Finance.

Even before the explosion the country’s economy had been in a downward spiral after the government unilaterally defaulted on eurobonds worth $31bn in March.

The government turned to the International Monetary Fund for a $10bn bailout, but talks have stalled due to the fractious politics of the country. That further weakened the Lebanese pound – pegged to the US dollar since 1997 – which has lost more than 80 per cent of its value against the greenback in the black market. Inflation has surged to 112 per cent in July, from about 90 per cent in June, according to official data.

“I would like to know the central bank reserves where did they go? I have many questions on the engineering of bailing out the Lebanese banks,” Mr Hariri said, in reference to Mr Salameh’s so-called “financial engineering” operations with local lenders.

Mr Hariri said he has not had any contact with Mr Salameh in 15 years.

“I have not been in contact with him … I have not talked to him since the death of my father. Not even a phone call,” he said.

Mr Hariri, 54, has been vocal about his opposition to the sectarian system, the ruling political class and the new prime minister designate Mustapha Adib.

“I would never seek the prime minister’s office,” Mr Hariri said. “We are seeking a technocratic non-sectarian government. The most important is the qualification [of the cabinet ministers]. We have to make sure that [there] are the right people. A small government and not to have a large government that is appointed by the same configuration.”

Mr Hariri is estimated to have a net worth of $2bn, according to Forbes. He has a multibillion dollar real estate development in the heart of Jordan as well as investments in Lebanon and Europe. For Lebanon to move forward economically, it needs to address the corrupt and dysfunctional system and replace it with a transparent environment that is apolitical and unwavering in the implementation of necessary reforms, Mr Hariri said.

“The most important thing, what did Rafik do, God bless his soul, [is to] restore confidence. How do you restore confidence? We need a non-sectarian government that puts things in order. This system has brought a financial collapse, an economic collapse,” Mr Hariri said.

“We need a government that is in complete divorce, like almost the entire Lebanese population, that is in complete divorce from this unholy marriage [of] Hezbollah and the warlords and whoever supported them in the last 15 years,” he said. “We need a government that puts the house in order, we cannot say let’s do the financials and forget about Hezbollah. No. We need a total solution from that symbiotic relationship between Hezbollah and the warlords.”

Mr Hariri, who said he was personally impacted by the country’s economic crisis, said the support of the international community is critical to Lebanon.

“We cannot do this on our own. That is absolutely true, we need the international community,” he said. “We need to find a consolidated solution. This is a very dangerous situation. It cannot continue. We are in the abyss.”

Looking ahead, he said Lebanon’s ability to turn a page rests on reconstruction, aid, an IMF package, assistance from the World Bank and restoring trust by eradicating the sectarian culture that permeates across the country’s institutions.

“You need to root out the presence of a state within a state, the judiciary system must be cleaned, the security apparatus must be cleaned, the civil service must be cleaned,” Mr Hariri said. “To me it is very important to have constitutional reform where you separate religion from the legislative and executive branch. I would add limitation of terms for the presidencies. An electoral law that truly represents the wishes of the people.”

In parallel to these efforts, confidence can restored by focusing on rebuilding the banking system, after a complete audit, Mr Hariri said. That will help attract capital flows from the Lebanese diaspora again. Tourism will be key to the economy’s revival, as well as beefing up the education system and leveraging Lebanese goods which, with the right branding and investment, could develop industries and spur growth, he said.

Mr Hariri, who is half-Iraqi, said Lebanon should borrow a page out of Iraqi Prime Minister Mustafa Al Kadhimi’s playbook. He praised Mr Kadhimi for his efforts to fight corruption in the country and restore stability to Iraq.

French President Emmanuel Macron and Iraqi Prime Minister Mustafa al-Kadhimi react during a news conference after a meeting, in Baghdad, Iraq September 2, 2020. REUTERS/Gonzalo Fuentes/Pool
French President Emmanuel Macron and Iraqi Prime Minister Mustafa Al Kadhimi react during a news conference after a meeting, in Baghdad, Iraq on September 2, 2020. Reuters

“I think Kadhimi is on the right track. He is trying his best to clean up the system. You look at the Iraqi model, we should have the same model, a copycat, because he’s cleaning up the system, he’s not compromising, he’s saying this is the only way to move forward,” Mr Hariri said.

“He’s trying his best to clean up the system and he got the support,” Mr Hariri said in reference to five agreements Iraq secured, worth $8bn, during a visit by the Iraqi premier to the White House last month.

“This tells you if you do what you have to do from the inside, the support will come. We can do the same, we have to,” Mr Hariri said.

Updated: September 3, 2020 06:38 PM

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