BDL acting Governor Wassim Manssouri at one of his first press conferences in office, Aug. 25, 2023. (Credit: Mohammad Yassine)
A year has passed since Wassim Mansouri took over the reins at the Central Bank (BDL) following Riad Salameh’s departure. From day one, he spoke of a series of policies he planned to implement in close collaboration with the other vice-governors.
After a few months, he listed his successes, claiming that he carried out his mission brilliantly and with determination. Explicitly at times, implicitly at others, he praised himself for having implemented a whole series of measures.
Is that true? Have the measures been effective? Is Mansouri’s record so positive? Here is a breakdown of what the acting governor has done since he took over.
To stop financing the government without a legal framework defining spending and repayment procedures
This process had started when Salameh was still in office. At the end of summer 2021, he stopped supplying Electricite du Liban (EDL) with dollars and financing the government’s program of subsidizing imports. Long before that, he had already stopped buying government-issued treasury bills. Mansouri just finalized the few remaining payments. On the other hand, he strengthened the program designed to pay public-sector employees their salaries in dollars, which is a form of indirect state financing. This is although he has been using the lira collected by the Finance Ministry to purchase these dollars.
To adopt a unified exchange rate (LL 89,500 to the dollar) in the general budget and all financial sector balance sheets and transactions
Here too, it is important to recall that this process had begun several months before Salameh’s departure. Between April and July 2023, the exchange rates ranged from LL 86,500 on Sayrafa to LL 97,000 on the parallel market, with an average of around LL 92,000 – namely a 2.7 percent difference – from the rate Mansouri set.
However, the International Monetary Fund (IMF) recommended against maintaining a fixed exchange rate to avoid repeating the same mistake Salameh made between 1997 and 2019, along with its colossal losses, favoring a relatively flexible rate.
In this context, Mansouri promised when he took office to launch a trading platform and announced an imminent contract with Bloomberg. However, he reneged on this promise, citing the war in southern Lebanon.
To stabilize the exchange rate, Mansouri employed several methods, including reducing the money supply in circulation in lira from over LL 80,000 billion to around LL 60,000 billion. He also benefited from expanding the economy’s dollarization, with the dollar being used in 80 percent of the market activities and commercial transactions, as well as private and public sector salaries. There is no longer enough lira in circulation to meet the demand for dollars, which has helped stabilize the exchange rate. In addition, BDL agreed with the government not to increase spending in lira. This has increased the government’s and public institutions’ deposits with BDL, reaching the equivalent of $5 billion (in lira, dollars and lollars). On the other hand, this means that the government cannot increase its social spending (on health, education, etc.), which is at a record low, nor its capital spending (infrastructure maintenance and modernization).
To continue to inject monthly dollar withdrawal quotas for depositors and increase the number of beneficiaries of the corresponding circulars
Regarding deposit withdrawals, although Mansouri widened the circle of beneficiaries from the circulars, this decision remains insignificant for depositors’ associations. He is also struggling to fulfill his promises. For example, Circular no. 166, which allows depositors who did not benefit from Circular no. 158 to withdraw $150 per month, has not been fully implemented, with some banks refusing to comply.
Earlier this year, Mansouri canceled Circular no. 151, which allowed depositors to withdraw their dollars at LL15,000 to the dollar. However, banks continue to do so, taking advantage of the depositors’ needs, and BDL is turning a blind eye to this haircut that exceeds 83 percent.
Not only is there stagnation in terms of overall banking reform, but even on minor issues, there is no notable progress to report. In 2022 and 2024, BDL appointed four acting directors to head the National Credit Bank, al-Baraka Islamic Bank, Federal Bank and Credit Bank, mainly due to their non-compliance with circulars on deposit withdrawals. To date, none of these cases has been addressed from start to finish.
To reverse foreign currency (reserve) indicators from depletion to targeted growth to reassure depositors and investors
Mansouri claimed that this is one of BDL’s major achievements. The monthly average increase exceeded $130 million, reaching a total of around $10.3 billion in mid-July 2024, compared with $8.7 billion when he took office (Aug. 1, 2023). But the published results lack transparency when it comes to foreign currency bonds, making it difficult to know the net balance. The last time BDL announced its foreign currency bonds in a clear way was in September 2023. Since then, it only shared information on its foreign assets.
To collaborate with the U.S. Treasury Department, the Financial Action Task Force (FATF) and other international players to give Lebanon a chance to not be gray-listed
BDL managed to increase its reserves by taking advantage of the market dollarization and using intermediaries to collect dollars on its behalf. However, the question remains as to the origin of these dollars, with some flows suspected of originating from risky activities, exposing Lebanon to possible FATF gray-listing. In this respect, BDL blames the state and the judicial system. However, it is crucial to recall that it also bears some responsibility, as Mansouri chairs the Special Investigation Commission on combating money laundering and terrorism financing.
To phase out Sayrafa exchange platform completely, and gradually replace it, based on reliable and transparent rules and data.
The question is: In case BDL launches the Bloomberg trading platform, will it be able to collect as many dollars? This platform, which is supposed to be transparent in line with international disclosure standards, risks discouraging dollar supply when its origin cannot be verified. This could lead to a return to the parallel market and speculation on the lira and the dollar.
There are other questions to consider: Can BDL really increase its foreign assets in USD through the Bloomberg platform? Is it currently taking advantage of the cash economy to collect these dollars? What about the dollars belonging to the state and banks (according to Circular 165), which could be included in the BDL’s foreign assets and inflate them?
To make BDL a plaintiff in the legal proceedings against Salameh in France and other European countries
When it comes to responsibility and accountability, little has changed at BDL. Although the Central Bank is now involved in the legal proceedings against Salameh in Europe, it has not become involved in the cases in Lebanon, where it is only cooperating with the judiciary by providing some of the information requested, but nothing else. Why does BDL itself not lodge a complaint, in accordance with articles 206 and 26 of the Code of Money and Credit, where violations are obvious? Article 206 stipulates that BDL must prosecute offenses before the criminal courts. Article 26 allows the governor (or acting governor) to take legal action on behalf of BDL. Despite the serious violations, Mansouri has not filed any complaints since he took office in August 2023.
Moreover, its action in Europe may seem unjustified, given that the Lebanese state is already involved in these cases. Why should it intervene when BDL is the state’s bank, especially as the state uses pro bono lawyers, while BDL pays some of the best-known and most expensive law firms in Europe?
In conclusion, BDL has yet to answer the most sensitive question of whether it is ready to gradually implement concrete banking reforms and increase deposit withdrawals, relying on its growing dollar reserves. Its transitional monetary policies are designed to buy time for a regime that continues to refuse to implement the staff-level agreement signed with the IMF in April 2022. BDL is procrastinating, like a tightrope walker on a silk thread, instead of rolling up its sleeves and implementing radical banking reform. What is it waiting for to act, instead of hoping for a caretaker cabinet to take action as if waiting for Godot?
This article was originally published in L'Orient-Le Jour and translated by Joelle El Khoury.