Top Lebanese official in IMF talks calls for central bank head to resign amid corruption allegations

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Lebanon's caretaker Deputy Prime Minister Saade Chami speaks during an interview with The Associated Press at his office in Beirut, Lebanon, Thursday, May 18, 2023. Chami, who is heading negotiations with the International Monetary Fund for a bailout package for the small, crisis-ridden country, called Thursday for Lebanon's embattled central bank governor to resign in light of allegations of corruption and an international arrest warrant issued against him. (AP Photo/Bilal Hussein)

BEIRUT – The Lebanese official heading talks with the International Monetary Fund to bail out Lebanon's tanking economy called Thursday for the country's embattled central bank chief to resign, amid allegations of corruption and an international arrest warrant issued against him.

Once seen as the guardian of Lebanon’s financial stability, Central Bank Gov. Riad Salameh is now widely blamed for an economic meltdown that began in 2019. The Lebanese pound has since plummeted in value and wiped out much of the savings of ordinary Lebanese, plunging an estimated three-quarters of the population into poverty.

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Lebanon’s caretaker deputy prime minister, Saade Chami, told The Associated Press in an interview that the allegations against the central bank chief put the government’s credibility at risk and “could threaten the country’s financial relations with the rest of the world,” including with the IMF and other global financial institutions.

Chami is the highest-ranking Lebanese official to call for Salameh's resignation to date.

Salameh, 72, has held his post for almost 30 years. A European-led investigation into his personal wealth stashed abroad has raised questions about his tenure at the central bank and wider issues of corruption in Lebanon's financial and political system.

A spokesperson for Salameh, who has denied allegations of corruption and mismanagement, did not immediately respond to a request for comment. Salameh said in an interview with Saudi-owned TV station Al-Hadath Thursday that he would resign only if he was convicted of a crime but dismissed the accusations against him as "not a judicial case, but a political case.”

Chami said that although Salameh is innocent until proven guilty, “it is not possible nor acceptable for anyone who is accused of multiple alleged financial crimes in several countries to continue to exercise his powers" as central bank head. The charges against Salameh “are reputational risks” and “will necessarily be a distraction” for a central bank office that is "entrusted with the stability of the financial system,” he said.

Salameh’s term comes to an end in July, and he has said he would not seek to extend it.

Since Salameh’s remaining time in office is relatively short, rather than recusing himself during any ongoing investigations, “it would be better for him to resign, and if not, the government needs to take a decision," the deputy prime minister added.

A French investigative judge Tuesday issued an international arrest warrant for Salameh after he didn’t show up for questioning in France on corruption charges.

A European judicial team from France, Germany and Luxembourg has been conducting a corruption investigation into an array of financial crimes they allege were committed by Salameh, his associates and others. The allegations include illicit enrichment and laundering of $330 million.

Salameh has repeatedly denied all allegations against him and insisted that his wealth comes from his previous job as an investment banker at Merrill Lynch, inherited properties, and investments. In a statement earlier this week, he accused the French investigation and judicial process of “double standards” and of leaking confidential information to the media. He vowed to appeal the arrest warrant.

Amid Lebanon's dual economic and political crisis, appointment of a new central bank chief won't be easy. The country has lacked a head of state since former President Michel Aoun left office in October, as political factions have been unable to agree on a replacement, and the caretaker Cabinet has limited powers.

Chami said that ideally a new governor would be appointed immediately should Salameh resign or be removed. But if no consensus could be immediately reached on a candidate, the central bank’s first vice-governor would automatically take over as a temporary replacement, he added.

In the meantime, progress on reforms required to clinch a deal with the IMF has largely stalled, after Lebanon reached a preliminary agreement with the international lender-of-last-resort more than a year ago.

At the same time, the financial crisis that began in 2019 has deepened. Ordinary citizens have seen their savings slip away as the market value of the currency plummeted from 1,500 pounds to the dollar pre-crisis to around 95,000 to the dollar today.

Lack of trust in the banking system has driven the growth of a chaotic cash-based economy. Fluctuating and multiple exchange rates have allowed some wealthy and politically connected players to make large profits from arbitrage - estimated by the World Bank in a report released this week as at least $2.5 billion.

Further delays in making reforms and clinching an IMF deal will exacerbate the crisis, leading to “more unemployment, more migration” and dwindling financial reserves, Chami said. But he said he has not given up hope for a solution, or for an IMF deal.

“It is a very dangerous situation, but also it is not extremely difficult to solve if there is a political will,” he said.

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