Crisis in Lebanon's Central Bank: The search for alternative solutions

The "Governance Alliance," which brought together Hezbollah, the Free Patriotic Movement, and the Marada Movement, toppled the session of the caretaker government scheduled for Thursday.

Consequently, the plans for extending the term of Lebanon's Central Bank Governor, Riad Salameh, appointing a replacement, or finding a legal solution to regulate the bank's administration after the end of the governor's term, have all collapsed, with no recourse to the Monetary and Credit Law.

This article was originally published in, translated from the Lebanese newspaper Al-Akhbar.

The news conveyed to Parliament Speaker Nabih Berri and Caretaker Prime Minister Najib Mikati Wednesday prompted them to search for an alternative solution to ensure that none of the four Central Bank deputies resign.

Contacts were made, resulting in an initial agreement for a 'necessity legislation session' in the parliament, allowing to lend Banque du Liban (BDL) approximately 800 million dollars to be disbursed over a maximum of four months, secured from the reserves held by BDL.

This is the only remaining option for the ruling authorities to convince the Central Bank deputies to cooperate.

However, Mikati met on Wednesday with the four BDL deputies and expressed his concerns about the dangers of a power vacuum within the Central Bank if the first and second deputies resign or refuse to carry out their duties. This would result in a significant problem in finance and public finances.

Mikati assured them that he is trying to meet some of their demands, mainly providing legal cover through the parliament to use some of the reserve funds. However, he emphasized that BDL will cease providing any financial support, such as the Sayrafa exchange platform.

Moreover, the four BDL deputies informed the PM, in the presence of his deputy and the Finance Minister, about the new working mechanism, which includes providing solutions for the salaries of public sector employees. 

The mechanism would determine the exchange rate for their salaries (costing 80 million dollars monthly) and provide sustainable support for covering chronic diseases (costing 35 million dollars monthly), settling some essential loans, and retaining an amount to address emergencies.

Speaker Berri understood the divergence of Hezbollah and the Marada Movement from him

The four deputies require the government to present an urgent plan to activate all the departments of the Ministry of Finance responsible for tax collection to ensure feeding the treasury with Lebanese liquidity, which should reach one-third of the current liquidity in Lira, estimated at around 80 billion Lebanese pounds.

If these points are confirmed within the next two days, First Vice Governor Wassim Mansouri may reconsider his resignation decision. In case of resignation, he has decided to stay home and not carry out any official duties if asked.

Although the other three deputies (Bashir Yaqzan, Salim Shahin, and Alexander Mouradian) informed Mansouri that they would not resign with him, the second deputy, Yaqzan, is not likely to take on the task if Mansouri declines. Instead, he will proceed with his resignation.

However, ministerial positions rejecting the attendance of any session to appoint a new governor continued on Wednesday, making it impossible to hold such a session due to the lack of quorum.

In addition to the FPM deputies, the two Marada ministers, Ziad Makari and Johnny Qorm, and two ministers, Walid Nassar and Issam Sharafeddine, announced they would not attend any appointment session.

Hezbollah also informed Mikati that ministers Ali Hassan Khalil and Mustafa Bayram would boycott the session, prompting Mikati to withdraw the invitation.

Ministerial sources stressed that Berri understood the stance of Hezbollah and the Marada Movement at this stage. Still, his escalation was due to wanting to avoid bearing responsibility for something not well-defined.

The sources considered that "what Berri tried to do in the past few days was to absolve himself of responsibility, as he realizes the impossibility of appointment or extension, but he wanted to protect himself and Mansouri by saying that he did what was required of him. But the political forces hindered, and thus, no one can blame him or Mansouri for what might happen."