New Lebanese government renews central bank audit | World news

by SARAH EL DEEB, Associated Press

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 country hit by the crisis.

Alvarez & Marsal withdrew from an earlier deal late last year, complaining that after months of work it was unable to obtain the information needed to conduct its audit. The pullout was a blow to calls for accountability in the country mired in decades of corruption that many see as one of the main reasons for the economic collapse.

A forensic audit has been a key request from the International Monetary Fund and international donors who have said they will not give money to Lebanon without major reforms to tackle corruption and widespread waste in the institutions of the world. ‘State. Meeting the demand was complicated by an internal power struggle between different groups in Lebanon who disagreed over the extent of the financial problem and who is to blame.

Lebanon, meanwhile, struggled without a fully functioning government for more than a year amid one of the world’s worst economic and financial crises. A caretaker government urged a forensic audit after the country defaulted to repay its massive debt for the first time in 2020.

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A new government was appointed earlier this month and the reinstatement of the forensic audit was virtually the first contract signed by Finance Minister 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. According to his curriculum vitae, the position enabled him to participate in the formulation of the bank’s contribution to the reform programs for Lebanon.

But it was feared that not much had changed to achieve different results this time around.

Mike Azar, an independent debt adviser, said problematic issues had not been addressed, such as securing direct access to accounting, IT systems and central bank staff. There is no independent oversight of the audit. The fact that the current minister is a former central bank official appears to be a conflict of interest, Azar said.

“He should recuse himself from overseeing the audit,” Azar said. “If these issues are not resolved, the audit is unlikely to be successful. “

El Khalil’s office said the company would report 12 weeks after starting its audit. 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.

Cash-strapped, the new government has said one of its priorities will be to remove subsidies on commodities.

On Friday, the new Minister of Energy announced further increases in gasoline prices of nearly 40%. This brings the price of 20 liters of 95-octane gas to 174,300 Lebanese pounds and that of 98-octane gas to 180,000 Lebanese pounds. It’s between $ 116 and $ 120 respectively, depending on the official rate.

But in the midst of the economic crisis, the local currency is in free fall and there are multiple exchange rates, including one set by the central bank to organize imports. The currency pegged for 30 years to the dollar at 1,500 Lebanese pounds is now traded on the black market at a rate ten times higher.

Besides the shortage of supplies, multiple exchange rates and impending subsidy removal plans have caused massive hoarding, further exacerbating Lebanon’s hardship. 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. Prices of diesel for power generation, in the midst of an almost non-existent national grid, have more than increased tenfold, making it impossible for many families to obtain electricity. Many businesses have had to close.

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