Beirut: The Lebanese Cabinet took all but a single minute to grant Riad Salame a fifth six-year term as Central Bank Governor, in what was an unprecedented move that strengthened one of the country’s key institutions.
Unlike most state establishments, the banking sector remains impressively functional under Salame’s vigilance, even though a big deficit continues to plague the budget, which significantly weakens the economy.
Salame is known for being a stickler on fiscal responsibility. He has single-handedly navigated the country’s financial sector away from collapse even though the cost of living has significantly increased and Western sanctions have been placed on banking institutions with suspected ties to Hezbollah officials.
Salame was first appointed by President Elias Hrawi and Prime Minister Rafik Hariri in August 1993.
That year was painful in contemporary Lebanese history as it witnessed a large Israeli attack on southern Lebanon, followed by a methodical Cabinet crisis that slowed the recovery from the country’s 15-year civil war.
Despite challenges, Hariri pushed ahead with his ambitious plans to rebuild Beirut.
He appointed 72 civil service officials and Salame was given the Central Bank portfolio.
A former vice-president of Merrill Lynch & Co., Salame brought rare financial expertise to the war-torn country.
He was able to halt the depreciation of the Lebanese Lira (pound) against the US dollar and other foreign currencies.
Over the years, his efforts helped reduce inflation, beefed the bank’s foreign currency reserves [around $50 billion in 2016 though they fell by $1.6 billion in the first five months of 2017 over fears that his term may not be renewed], increased gold holdings — which reached 286 tonnes in 2017 — and introduced strict regulations on the banking sector.
In fact, Salame performed so well that every time his term was up for renewal, politicians from every stripe backed him unreservedly both to send a positive signal to the local market and, perhaps more importantly, to encourage international investors.
The latest renewal was no doubt the most difficult because President Michel Aoun tried to forsake the nomination on account of Salame’s pledges to work with the US as Washington imposed strict sanctions onto Hezbollah and its affiliates.
In the event, wealthy bankers and merchants persuaded Aoun to place Lebanon’s interests above trivial politics.
Sharp improvements were recorded during the past few days in the prices of the Lebanese sovereign Eurobonds in London that were directly tied to the Salame term renewal given the latter’s reputation among global central bankers.
