Diab Hails Hiring of Firm to Audit BDL Accounts as 'Historic Decision for Lebanon'

Cabinet on Tuesday agreed to sign contracts with foreign firms in order to audit the accounts of the central bank.

The Presidency said it has been agreed to hire the Alvarez and Marsal firm for forensic audit and the KPMG and Oliver Wyman firms for accounts audit.

Prime Minister Hassan Diab hailed the move as a “historic decision for Lebanon” and a “cornerstone for reform.”

“It represents a drastic transformation in the course of unveiling the waste and thefts that happened at the financial level. That’s why this decision will be one of the government’s most important achievements,” Diab told Cabinet.

Speaking after the session, Information Minister Manal Abdul Samad told reporters that Finance Minister Ghazi Wazni said the preparation of the contract requires one week and that the audit procedure might take between three to six months.

Health Minister Hamad Hasan meanwhile said that the ministers of Hizbullah and the AMAL Movement “voted with blank ballots because the listed firms either have branches in Israel or contain Israeli experts.”

Justice Minister Marie-Claude Najem for her part described forensic audit as “the most important decision,” noting that the Alvarez & Marsal firm is “an important global firm the same as the Kroll firm.”

The hiring of New York-based Alvarez & Marsal to conduct a forensic audit of the central bank's accounts aims to determine how massive amounts of money were spent in the nation plagued by corruption.

Lebanon's economic crisis, rooted in decades of corruption and mismanagement, deepened after nationwide protests against the political class erupted in October. Banks have imposed informal capital controls, limiting the withdrawal of dollars, and the cash-strapped government defaulted on its sovereign debt in March for the first time. The coronavirus lockdown that lasted three months threw tens of thousands of people into poverty and unemployment.

The move to name Alvarez & Marsal came after weeks of delays after other companies were not accepted because of alleged links to Israel, with whom Lebanon is at war.

The government had asked the General Security Directorate to look into several companies, and Alvarez & Marsal was among those cleared.

The government had been calling for a forensic audit into the central bank's accounts since March following the country's first ever default on paying back its massive debt.

The announcement comes as talks between the government and the International Monetary Fund have failed to make progress since they started in mid-May. Two leading members of the Lebanese government team in talks with the IMF resigned in recent weeks over politicians' attempts to downplay losses at the central bank.

President Michel Aoun has been a strong supporter of a forensic audit but Lebanese media have reported that other politicians were opposed to such a move that could reveal parties that have been benefiting from corruption.

The IMF said in April that Lebanon's economy is expected to shrink 12% in 2020.

On Monday, a Lebanese judge ordered some of the assets of central bank Governor Riad Salameh be frozen. The decision, which is symbolic, came after a lawsuit filed by five lawyers who belong to an activist group known as "the people want to fix the regime."

The lawyers accused Salameh, who has held the post since 1993, of negligence and inciting people to withdraw their money from bank accounts and selling state bonds.

Since October, Lebanon's currency has lost more than 80% of its value, leading many to blame Salameh for the crash. Protests outside the central bank are not uncommon in Beirut's commercial district of Hamra.