Lebanon’s cabinet is set to select a new central bank governor following a messy battle that has divided the country’s fledgling government and tested its commitment to reforming the crisis-laden economy.
After a weeks-long race marred by mudslinging and accusations of foreign interference, wealth manager Karim Souaid has emerged as the frontrunner, according to several people familiar with the matter. The seasoned asset manager is the candidate of choice of Lebanon’s banking elite, they say, which has long opposed reforms to the country’s financial sector.
Other potential contenders include the IMF’s Middle East director Jihad Azour, economist Jamil Baz and former labour minister Camille Abousleiman, according to the people familiar with the matter. The cabinet is expected to hold a vote as early as Thursday.
The next governor of the Banque du Liban (BdL) will play a crucial role in determining how the estimated $70bn in losses across the banking sector since Lebanon’s financial crisis began in 2019 will be distributed.
The winner will be in a position to influence whether to push through reforms demanded by the IMF, such as restructuring the banking sector and amending banking secrecy regulations. They must also work to unlock desperately needed investment and reconstruction aid from western and regional governments following the devastating recent war between Israel and the militant group Hizbollah.
Souaid’s candidacy has emerged as one of the earliest sources of discord within Lebanon’s government, which came to power in January pledging to prioritise reforms and end political paralysis and economic malaise.
President Joseph Aoun has pushed for Souaid to clinch the nomination, arguing that he is the best candidate, according to the people familiar, while Prime Minister Nawaf Salam has expressed reservations.
Last year, Lebanon was placed on the “grey list” of the global watchdog for financial crimes for failing to address concerns about terrorism financing and money laundering.
Nasser Saidi, a former minister and BdL vice-governor, warned that powerful interest groups were wielding too much influence over the selection process. “The stakes are too high: you cannot have the same people responsible for the biggest crisis Lebanon has ever been through also trying to restructure the banking sector,” he said.
“How are we going to convince the rest of the world that it can trust Lebanon’s banking system, and provide the country with the funding it needs to rebuild [after the war]?”
The prime minister’s office declined to comment, while the president’s office did not respond to a request.
Souaid would replace interim governor Wassim Mansouri, who has been overseeing the bank since veteran Riad Salameh — the man widely blamed for the financial meltdown — stepped down in August 2023. Salameh has since been arrested on charges relating to a raft of financial crimes, which he denies.
Lebanon’s economic crisis was rooted in years of mismanagement and corruption and was then aggravated by the 2020 Beirut port blast, the Covid-19 pandemic and war with Israel. Since 2019, the currency’s value has collapsed by 95 per cent, a banking crisis has cut off people from their savings and there has been no public debt restructuring.
Salam, the prime minister, is seeking to renegotiate a 2022 IMF deal, which includes a $3bn loan facility as well as the appropriation of banks’ foreign currency deposits held at the BdL.
But the IMF’s proposed reforms have been consistently opposed by the hardline contingent of the country’s banking lobby, the Association of Banks in Lebanon, which has campaigned for the bankrupt state to shoulder the burden of the crisis by liquidating public assets.
The bank governor’s race has gone on behind closed doors, including in meetings between candidates and White House and Elysée staffers, according to the people familiar with the matter.
The banks’ lobbying efforts have been led by Antoun Sehnaoui, the powerful main shareholder of one of Lebanon’s largest banks, Société Générale de Banque au Liban, according to multiple media reports and people familiar with the matter. Sehnaoui could not be reached for comment.
Souaid is the managing director of Growthgate Capital, a Bahrain-based private investment firm he founded in 2007.
Presidential adviser Varouj Nerguizian sits on Growthgate’s board of directors alongside the son of former prime minister Najib Mikati, which Souaid’s critics argue is a sign that he is too close to Lebanon’s power brokers.
“In Souaid, the banks see someone who is friendly to them, and hostile to the IMF,” said a Lebanese politician who opposes Souaid’s candidacy.
In recent private meetings with diplomats and Lebanese politicians, Souaid has said he would limit the IMF’s intervention, claiming it undermines Lebanese sovereignty, according to a western diplomat and two people familiar with the matter.
He also said he would use the BdL’s gold reserves to compensate depositors and block a banking restructuring bill as well as the overhaul of banking secrecy, the people said.
Souaid has publicly endorsed some of these policies, including by funding and backing a 2023 paper — criticised by reformists — which recommended substantial haircuts that would place the bulk of the losses on depositors.
Souaid has not responded to multiple requests for comment.
Supporters of Azour, the IMF’s Middle East director, argue he is better placed to handle the reform initiative given his background, while other contenders bring a range of government, economic or banking experience.
But the leaders of several Lebanese public policy organisations this week said in a statement that they had little faith that any candidate was being chosen on their merits, rather than “cronyism” and “horse-trading”.
“This is Lebanon’s moment of reckoning,” they wrote. “Appointing a new central bank governor is not only about economic recovery — it is a test of the new leadership’s determination to break from the past.”
https://www.ft.com/content/4453da90-ff34-4939-be79-b1cb060e4218
