Diab’s plan also included a forensic audit of the central bank, the Banque du Liban, which among other things is tasked with safeguarding the country’s monetary and economic stability. Riad Salameh, who has been the bank’s governor since 1993, enjoyed worldwide acclaim, including for his so-called financial engineering. It basically worked like this: Commercial banks offered double-digit interest rates for new term deposits and then lent that money to the central bank, which then lent it to the government. The arrangement, which even the French president Emmanuel Macron called a “Ponzi scheme,” relied on banks sucking in new money. The share of public debt held by banks amounted to more than 40 percent. From 1993, when Salameh assumed his position, to 2018, the banks’ net profits increased 3,000 percent to $2 billion.
The high interest rates on bank deposits encouraged a rentier economy that disincentivized investment in industry and agriculture. Hala Bejjani, the former managing director of Kulluna Irada, a civic organization for political reform, told me that the signs of Lebanon’s financial doom were “obvious” but that leaders didn’t care to see them. She and a team of development specialists, economists and finance experts met with senior politicians, including the president, in March 2020, to warn of an impending financial implosion and suggest ways to avert it. “It’s a recipe, like making a cake,” Bejjani said of the plans. “They were all absolutely shocked at what we were telling them,” Bejjani said, “because this is the job of Riad Salameh. They were each focused on their fiefs.”
‘If you still believe that you can trust the same warlords to take new aid money in order to fix the problems, you’re delusional.’
Salameh has refused to answer many of the questions submitted by the foreign auditing firm Alvarez & Marsal, selected by Diab’s cabinet, citing a 1956 Banking Secrecy Law. Najm, the former justice minister who has been one of the fiercest proponents of a forensic audit, railed against Salameh’s claims that public funds were subject to the banking secrecy law, which had to be lifted for a year before an investigation could proceed. “There’s no need, and it’s a dangerous precedent,” she said, “because it gives you the idea that you can’t do any audit without each and every time lifting the law.” Attieh, who attended cabinet sessions about the forensic audit, pushed for auditing not just the central bank but all of the state’s ministries, a recommendation that was not adopted.
Salameh is currently being investigated by Swiss and French authorities for amassing hundreds of millions of dollars, allegedly through embezzlement and money-laundering schemes. He denies any wrongdoing. The French president has said that Lebanon’s ruling class used its ties to banks to transfer funds abroad during the financial crisis. Many Lebanese, including Michel Daher, an entrepreneur and first-time member of Parliament who tried and failed to introduce a capital-control law in 2019, want the international community to reveal the foreign bank accounts of Lebanese politicians. “If people are starving and their political leaders have billions of dollars overseas and are selling them slogans,” Daher said, “people will turn on them.”
A new Lebanese government headed by Najib Mikati was formed in September, and in October it restarted the forensic audit of the central bank and talks with the I.M.F. The Saudis and their gulf allies, meanwhile, have withheld aid that would help dig Lebanon out of its deep hole, largely because of Hezbollah’s powerful role within the state and its strong ties to their regional nemesis, Iran. The West has also said that aid will be predicated on reforms and anti-corruption measures, a condition it has made and ignored in the past.
To people like Kobaissi, it’s clear that Western nations are “liars when they say they want to fight corruption” in Lebanon. If they were serious, he told me, “they would support accountability and regulatory bodies.” According to the Gherbal Initiative, a civil-society organization founded in 2018 that researches state contracts, foreign loans and grants, foreign states have often poured money into hazy schemes that never materialize. Assaad Thebian, Gherbal’s 33-year-old executive director, gave me a typical example: multiple foreign loans over the years, totaling some $200 million, for the same wastewater project that was never executed. “If you still believe that you can trust the same warlords to take new aid money in order to fix the problems, you’re delusional,” he said.