Lebanon’s incoming government restarts central bank audit

BEIRUT (AP) – Lebanon’s incoming Finance Minister Youssef El Khalil signed a contract on Friday with a New York-based company to conduct a forensic audit of the country’s central bank, a key demand of the international community to restore confidence in the crisis-struck Mideast nation.

Alvarez & Marsal had pulled out of an earlier deal late last year, complaining that after months of work, the company was unable to acquire the information it needed to conduct its audit. The withdrawal was a blow to calls for accountability in Lebanon, mired in decades of corruption many see as a key reason for the economic meltdown.

Lebanon was without a fully functioning government for over a year as rival groups haggled over the shape of the new Cabinet, and the economic and financial crises escalated.

Now, a week since it was named, the 24-minister Cabinet said it will make negotiations with the International Monetary Fund (IMF) its priority. Removing subsidies, which eat billions of dollars from the coffers of the cash-strapped government will also take precedence.

On Friday, the new Energy Minister, Walid Fayad, raised gasoline prices by nearly 40 per cent as reports swirled that subsidies would be fully lifted by the end of the month. The central bank had warned it doesn’t have enough foreign currency to support the subsidies bill.

Lebanese riot police stand guard in front the central bank building in Beirut, Lebanon. PHOTO: AP

A forensic audit of the Lebanese central bank has been a key demand by the IMF and international donors who have said that they will not give money to Lebanon without major reforms to fight corruption and widespread waste in state institutions.

The aborted audit was complicated by an internal power struggle in Lebanon, with political groups disagreeing on the scope of the financial problem and trading accusations.

Reinstating the forensic audit was among the first order of business for Finance Minister Youssef El Khalil. A former central bank official since 1982, El Khalil was last the executive director of the central bank’s financial operations department.

But for experts, little has changed since the last audit fell apart. Lingering issues are lack of independent oversight, securing direct access to the central bank’s accounting, information technology systems and staff, said independent debt advisor Mike Azar.

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.