Lebanon’s central bank is counting its gold reserves for the first time in at least three decades as the international community pressures the cash-strapped country to evaluate its assets to qualify for a bail-out.
About 20 per cent of the time-consuming exercise has been completed in the past two years, two senior civil servants told The National.
Banque du Liban employees, who are supervised by a government representative, had to pause their work for months owing to Covid-19.
They have descended into the bank’s vaults several times a week to weigh 12-kilogram gold ingots that are believed to number 13,000 in total. One by one, the metal bars are placed on a scale.
“It’s a very physical job,” said one of the sources.
Civil servants have yet to start on the estimated 700,000 coins the bank also holds.
The inventory is limited to checking that the expected amount of gold is present. Audit company KPMG will then step in to evaluate the metal’s worth, the source said.
The coins may have additional historical value, but experts The National spoke to have cast doubt on the ingots’ purity.
KPMG did not respond to requests for comment.
No inventory in decades
The government requested an inventory in March 2020 after it was made aware that another auditor, Deloitte, had been unable to conduct one, said the sources.
Analysts say the inventory plays a crucial role in better understanding the state’s losses.
“If the gold’s value is lower than estimated, then BDL’s losses would be higher than reported by this government,” said Mike Azar, a financial analyst.
Deputy Prime Minister Saadeh Shami has estimated the banking sector’s losses at more than $70 billion.
A leaked report by Deloitte shows that four years ago, it evaluated Banque du Liban’s gold reserves at close to $18 billion, of which 60 per cent is held in Beirut, and the rest at the US Federal Reserve.
The sources said they had no doubt that vast amounts of gold were inside BDL’s vaults.
“It’s not a trust issue. But inventories need to be done, just like any company should know what they have in stock,” said one. “I think the government did not do it before because of logistical difficulties.”
The sources believe this is the first physical count of gold held at the BDL since the Lebanon civil war, which raged from 1975 to 1990. Politicians say an audit may have occurred in the 1990s.
The National was unable to verify the time period in the absence of a response from BDL and Deloitte, the central bank’s long-time auditor until it withdrew last year.
A physical inventory of a central bank’s gold should normally be done regularly as part of its audit.
Economist Kamal Hamdan said he does not believe that the central bank has counted its gold since the civil war.
"I assume that Central Bank Governor Elias Sarkis, who bought most of the gold in the second half of the 1960s, counted it. But then there was the civil war, which made it difficult” said Mr Hamdan, who heads the Beirut-based consultation and research institute.
Mr Salameh was appointed shortly after the end of the war, in 1993. The request for an inventory can come from the government’s commissioner to the central bank, which, until 2016, was a job held by the same person for around two decades, sources say. He died in 2021, and it remains unclear whether he never made the request or whether it was refused.
But context is key, say analysts. The pressure caused by the country’s economic collapse may have played a role in triggering the inventory in 2020. “It’s not one person alone who decides these things,” said Mr Hamdan.
Economic collapse drives scrutiny
Public anger towards once-popular Mr Salameh is at an all-time high.
At least five European countries have opened investigations of suspicions of money laundering against Mr Salameh since 2020. He says he is merely a scapegoat and denies accusations of corruption.
Lebanese leaders have been unable to address the country’s economic meltdown, which started in 2019 after a crisis of confidence.
The Lebanese people lost about 70 per cent of their savings when banks imposed illegal capital controls. Most of the country has been pushed into poverty.
Government officials are negotiating a bail-out package with the IMF, which requested audits of the state’s main assets to evaluate financial-sector losses.
MP Fouad Makhzoumi, who is running in the parliamentary election next month, told The National he thought an inventory of the central bank’s gold was necessary because he did not trust the BDL or the “political system protecting it”.
“As a citizen of Lebanon, I need to know what’s happening,” he said.
Mr Makhzoumi complained that he had not received clear answers from BDL officials when he asked about its gold reserves.
“There are rumours that auditors had access to the safe in 1992, but I have no idea because I never got a proper confirmation of this with a certificate showing the number of gold bars,” he said.
At least two former top officials have told The National they saw the gold in the 1990s but could not recall an inventory taking place. “I went down to the vaults and saw huge amounts of gold,” said George Corm, who was finance minister from 1998 to 2000.
Asked why no inventory was done during his tenure, Mr Corm, a fierce critic of Mr Salameh, said: “The level of corruption at the time was not as high as it is today.”
Is Lebanon's gold saleable?
It remains unclear whether the gold ingots meet today’s standards of purity.
A source with knowledge of the subject said the central bank's gold might not meet the London Bullion Market Association’s benchmark because it was bought over 50 years ago.
“Gold bought before the 1970s is not of London Good Delivery standard and therefore cannot be easily sold,” they said.
The central bank cannot sell its gold without Parliament’s approval. The two civil servants said this was not on the table.
Mr Azar said an external auditor should be present during the inventory.
“If the purpose of the audit is to obtain third-party confirmation of the quantity and value of the gold, then the auditor should be present during the inventory, otherwise how can it confirm either?” he said.
One source said the BDL’s former auditors, Deloitte, and EY, started to attend the inventory before pulling out completely for reasons that remain unclear.
The Finance Ministry in August 2020 asked KPMG to conduct an audit of the central bank’s financial statements starting in 2018. Another auditing company, Alvarez & Marsal, is conducting a forensic audit of the bank.
Mr Shami said on television this week that KPMG did not have the expertise to assist with the gold inventory and would “hire experts”.
Asked during a brief phone call to clarify whether the experts would count the gold as well as evaluate its worth, he said: “I have no idea.”
The IMF did not answer when asked whether it had requested an external auditor to oversee the BDL’s gold inventory.
Finance Minister Youssef Khalil did not respond to text messages or a call.