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Navigating Transition at Lebanon’s Central Bank Leadership

11:12 | 31 تموز 2023LIMS output
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Central Bank

Riad Salameh’s three-decade-long tenure as the head of the Central Bank of Lebanon (BDL) is coming to a close this July, amidst an atmosphere of uncertainty stemming from a vacant presidency, which hampers the appointment of his successor.

These circumstances have triggered concerns regarding the direction of leadership within the central bank and the trajectory of its monetary policies. Notably, the spotlight is directed towards BDL’s digital exchange platform, Sayrafa.In this context, LIMS anticipated the temporary elevation of the first deputy governor to the position of acting governor, pending the selection of a new governor following the presidential election. Contrary to prevailing skepticism, LIMS asserted that this transition would bestow authority upon the first vice governor, dispelling conjectures about the latter’s supposed reluctance to assume these responsibilities.


Surveying the impending policy landscape, LIMS dismisses the immediate revocation of SAYRAFA by the incoming vice governor.

The platform serves as the foundation for establishing a benchmark exchange rate relevant to public sector transactions in foreign currencies, including tariffs, value-added tax on dollar-denominated transactions, utility bills, and remuneration for public sector employees. The cessation of SAYRAFA demands the establishment of an alternative, an undertaking currently pursued by the first vice governor in collaboration with financial information providers such as Bloomberg and Reuters. However, SAYRAFA also empowers the central bank to enact an active monetary policy, with the aim of influencing the exchange rate of the Lebanese Pound. LIMS advocates for the immediate discontinuation of this function, given the evident adverse consequences of central bank interventions, notably the depletion of foreign exchange reserves and the persistent erosion of currency valuation.
 
Given prevailing concerns about the opacity characterizing both the exchange rate determination process of SAYRAFA and its beneficiaries . The new platform is mandated to prioritize transparency.LIMS recommends a broader scope for the new platform, encompassing the recording of all market transactions to accurately reflect the authentic market exchange rate. This transformation hinges on the reintegration of banks into the foreign exchange market and the authorization for them to transact at the prevailing market exchange rate .  Effectively aligning with the parallel market rate or the so-called “black-market” rate. Consequently, Lebanon would undergo a transition from a multi-tiered exchange rate framework to a unified exchange rate system.

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