Ahead of talks with IMF and World Bank: Can new BDL governor Karim Souaid deliver solutions?

Report by Bassam Abou Zeid, English adaptation by Yasmine Jaroudi     

Lebanon's newly appointed Banque du Liban (BDL) governor, Karim Souaid, addressed key financial policy issues during a Cabinet session, shedding light on his stance on deposit recovery, state assets, and the country's economic future.  

During the meeting, ministers questioned Souaid extensively about Lebanon's financial crisis and potential solutions. He clarified that while his former institution had funded a study by the Harvard Growth Lab on Lebanon's economic collapse, he did not endorse its conclusions. 

Responding to ministers' inquiries further demonstrated his opposition to the study's recommendations.  

Souaid firmly opposed the write-off of bank deposits, instead advocating for a structured plan to return funds based on available financial resources. He underscored his commitment to constitutional principles and the Monetary and Credit Law, emphasizing the protection of private property.  

Rejecting the sale of state assets or Lebanon's gold reserves, Souaid suggested investing a portion of the gold holdings to generate liquidity for deposit recovery. He acknowledged the state's role in the financial collapse but distinguished between sovereign debt—such as Eurobonds—and commercial debt involving the BDL and local banks.  

His statements, which were officially recorded in the Cabinet's official minutes, garnered mixed reactions.

While some ministers were satisfied with his answers, others, particularly those aligned with Prime Minister Nawaf Salam, were more skeptical due to concerns over a promotional campaign in the media and banking circles, which raised doubts about Souaid's background.

In response to a direct question from PM Salam, Souaid stated that he had met banker Antoun Sehnaoui only once.   

Souaid now faces a challenging path ahead. 

He is set to present his economic strategy at the upcoming International Monetary Fund (IMF) and World Bank meetings in Washington on April 21, where Finance Minister Yassine Jaber and Economy Minister Amer Bisat will join him.  

The Lebanese delegation is expected to present a bill to ease banking secrecy laws, which the Cabinet approved with retroactive effects extending over ten years. 

However, whether this provision will pass in the Lebanese Parliament remains uncertain. 

Additionally, the Lebanese delegation will present a framework for restructuring the banking sector and discuss newly approved appointments with the Council for Development and Reconstruction.