The Swiss media daily Le Temps has issued a report on October 7th revealing that the International Monetary Fund (IMF) has warned about Lebanon’s current disaster in 2016 when it pointed to “the immense financial weakness of Lebanon.”
According to the Swiss daily, the Central Bank of Lebanon (BDL) and its governor Riad Salameh “censored” that particular critical part of the IMF report, deleting 14 pages from it.
Le Temps has obtained a copy of what it called the devastating audit report, which had gathered around it Riad Salameh, some IMF representatives, and several BDL executives back on April 9th, 2016.
The IMF led by Alvaro Piris warned at the very start of that meeting that the country is at the edge of a collapse.
“IMF experts confronted Lebanese officials with their findings. In particular, they established that the net deficit of the Central Bank, a hole of 4.7 billion dollars, represents 10% of the GDP. They also pointed out that local banks do not have the necessary liquidity to cope with a possible crisis,” Le Temps revealed.
“The simulation conducted [by the IMF] suggests that most banks would not have the necessary liquidity in the event of a crisis.”
However, none of the involved used the information to avoid the catastrophic situation the country has ended collapsing under.
Basically, they all knew, and yet they all carried on ‘business as usual.’ The IMF failed to report it and so did the Lebanese side.
Less than four years later, Lebanon started its dramatic descent into the abyss. A crisis that could have been prevented, according to financial experts.
The final report, which was then issued in January 2017, counted 70 pages instead of the original 84 pages, Le Temps has now revealed, stating that the IMF original report was never made public “at the insistence of the Lebanese side.”
Reportedly, the Central Bank removed key data from the report to conceal the upcoming crisis from Lebanese depositors and international investors.
It only mentions “some vulnerabilities in the system, but the cardinal warnings have disappeared.” Le Temps also holds responsible the IMF for Lebanon’s current disaster since “its experts knew the country was going to ruin.”
This current financial crisis could have been prevented – according to various financial experts – if the net deficit, which BDL has always refused to disclose, was tackled on time instead of ignoring it and concealing it.
Lebanon was already heading to its disaster in 2016 and those in charge did nothing to stop it.
In October 2019, the banking system deflated, and capital control was soon imposed on the people.
By 2020, the country was already collapsing. Over 6 million Lebanese, in the country and abroad in the diaspora, couldn’t have access to their money in banks, and the poverty rate escalated.
By 2021, shortages of essentials materialized, hitting dramatically the population: fuel, medicines, baby milk, and prices skyrocketing, and of course the scarcity of electricity, and the increased smuggling of subsidized products to Syria.
When asked by Le Temps about the implied censorship of the report, the Central Bank of Lebanon reportedly denied such possibility, stating that only the IMF can alter or change a report and that these reports are not only “discussed, accepted or rejected” by the BDL or its governor but also by the Lebanese government.
However, financial expert Henri Chaoul, who was the Lebanese government’s negotiator with the IMF and the adviser to the Finance Minister until June 2020, reportedly had no knowledge of that missing key data that could have saved Lebanon from its current catastrophe.
Interviewed by Le Temps, he reportedly reacted in shock, “If it had been published at the time, the banks surely would have acted very differently.”
“Even today, there is no transparency on the amount of foreign currency owned by the central bank,” he said.
After all, as he stated, the Central Bank is the one “responsible for the economic stability and monetary policy of the country.”
The original IMF report, according to Le Temps, indicated that 13 banks in Lebanon “are exposed beyond the regulations” and that some don’t hold “Letters of Guarantee from their foreign affiliates.”
That entire chapter of some 7 pages related to bank solvency also disappeared.
That information, if revealed back then, would have spared the hardships of the Lebanese and foreign depositors who have no longer access to their money in banks today.
According to sources of the Swiss daily, the relationship between the IMF and Salameh strained ever since that report, as Salameh endeavored to conceal the alarming reality of Lebanon’s finances.
Instead, he worked on capturing foreign capital and investments, promising record-breaking investments, all while concealing the scale of the debt, which continued to grow, “until the system collapsed in October 2019 and payment defaults increased,” Le Temps noted.
Ever since the resignation of the government on October 29th, 2019 under the pressure of the Lebanese Revolution, the people have looked up to the IMF as the one and only potential savior of the country.
IMF has promised to finance the country out of its crises in exchange for reforms and political guaranties.
Last month, on September 16th, it handed over 1.135 billion dollars to the Central Bank despite the absence of any reforms and political guarantees, other than the formation of a new controversial government.
On the ground, nothing has changed. Crises continue wrecking the country and people’s lives.
People still don’t have access to their savings in banks. The US Dollar is at 18,900-18,950 LBP in the black market (as of the time of writing), and essentials are still scarce: fuel, electricity, medicines…
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