Lebanon gripped by prime minister’s feud with bank governor
International financial support at risk as leading figures fight over economic crisis
A public fight between Lebanon’s new prime minister and its once untouchable central bank governor is jeopardising the state’s efforts to secure badly needed international financial support as it grapples with the worst economic crisis in decades.
The dispute came to a head this week after prime minister Hassan Diab, a former computer science professor, had lambasted governor Riad Salame’s handling of the country’s monetary crisis. Mr Salame, the dominant figure in Lebanon’s finance sector since its civil war, hit back on Wednesday, implying that there was a political campaign to undermine him.
In an hour-long speech, Mr Salame argued that the central bank had for years propped up the government to buy time for reforms, which never came. Accusations that he was solely to blame for any monetary policy mistakes were part of a targeted “campaign” against him, Mr Salame said.
Lebanon is at a critical juncture, having defaulted on about $90bn of debt in March, and the government and the central bank need to be working together to renegotiate with bondholders and ease the crisis, economists said.
Instead, the country’s two most important men are at loggerheads, exposing the factionalism and personal animosities that have dogged Lebanese politics and blocked reform for decades. Neither responded when the Financial Times sought comment.
“I am watching . . . the whole system, throwing fireballs like in Harry Potter,” said Roy Badaro, a Lebanese economist. “I don’t know who is Harry Potter and who is Voldemort.”
On the parallel market, the value of the Lebanese pound against the dollar has fallen almost 50 per cent since late January and food prices have doubled since October. Protests have reignited and rioters torched dozens of banks earlier this week.
“[Mr Diab and Mr Salame] should be working hand in hand to do the maximum possible to salvage the country,” said Sibylle Rizk, public policy director of Kulluna Irada, a Lebanese lobby group. “But clearly the governor of the central bank is not on the same wavelength as the government."