BEIRUT (AP) – Lebanon’s new finance minister on Friday signed a contract with a New York-based company to conduct a forensic audit of the country’s central bank, a key request by the international community to restore confidence in the Middle Eastern nation in crisis.
Alvarez & Marsal withdrew from an earlier deal late last year, complaining that after months of work the company was unable to get the information it needed to conduct its audit. The pullout was a blow to calls for accountability in Lebanon, mired in decades of corruption that many see as one of the main reasons for the economic collapse.
Lebanon was without a fully functioning government for more than a year as rival groups bargained for the form of the new government and economic and financial crises intensified.
Today, a week after his appointment, the cabinet of 24 ministers said it would make negotiations with the International Monetary Fund its priority. Removing subsidies, which eat billions of dollars out of cash-strapped government coffers, will also take priority.
New Energy Minister Walid Fayad hiked gasoline prices nearly 40% on Friday as reports circulated that subsidies would be fully lifted by the end of the month. The central bank had warned that it did not have enough foreign currency to support the subsidy bill.
A forensic audit of the Lebanese central bank was a key request from the IMF and international donors who said they would not give money to Lebanon without major reforms to tackle corruption and widespread waste in institutions. state institutions. The failed audit was complicated by an internal power struggle in Lebanon, with political groups at odds over the extent of the financial problem and the commercial accusations.
The reinstatement of the forensic audit was one of the first priorities of Minister of Finance Youssef El Khalil. A former head of the central bank since 1982, El Khalil was the last executive director of the central bank’s financial operations department.
But for experts, not much has changed since the last audit collapsed. Persistent problems are the lack of independent oversight, ensuring direct access to accounting, computer systems and central bank staff, said Mike Azar, an independent debt adviser.
The fact that the current minister is a former central bank official appears to be a conflict of interest, Azar also said. “He should recuse himself from overseeing the audit,” Azar added. “If these issues are not resolved, the audit is unlikely to be successful. “
El Khalil’s office said auditors will report 12 weeks after the start of their review. No date has been given for their start.
The country’s current economic and financial crisis, considered by the World Bank to be one of the worst in the world for the past 150 years, is rooted in decades of corruption and mismanagement. The tiny country of 6 million people, including Syrian refugees, struggles with fuel, medicine and basic commodity shortages as foreign supplies dwindle and the economy shrinks.
Following Friday’s gas price hike, the Lebanese will have to pay 174,300 Lebanese pounds, or $ 116, for 20 liters of 95-octane gasoline, and 180,000 Lebanese pounds, or $ 120, for it. 98 octane gasoline, according to official exchange rate.
But there are several exchange rates, including an exchange rate set by the central bank to organize imports. The Lebanese currency, pegged for 30 years to the dollar at 1,500 Lebanese pounds for $ 1, traded on the black market on Friday at nearly ten times that rate.
Long lines in front of gas stations often escalated into chaos or violence and caused serious traffic jams. Gas stations rationed the amount of gasoline they distributed. The prices of diesel for power generation, in the midst of a nearly non-existent national grid, have also more than increased tenfold, making it impossible for many families to have electricity for their homes. Many businesses have had to close.
Georges Brax, spokesperson for the association of petrol station owners in Lebanon, said Friday’s price hikes would be the last before the subsidies were completely removed.