Tensions between the president and the prime minister of Lebanon over the appointment of the new governor of the Central Bank

Lebanon last week elected a new central bank governor, sparking the first public disagreement between President Joseph Aoun and Prime Minister Nawaf Salam over government policies. 

Lebanon's cabinet agreed to appoint asset manager Karim Souaid as governor of the central bank, a crucial post for implementing the economic reforms demanded by the international community. 

His appointment was met with objections from the prime minister, who asked Souaid to commit to the government's reform agenda in a country suffering from a five-year economic collapse, widely attributed to official mismanagement and corruption. 

Salam said he had ‘reservations’ about Souaid's appointment, but gave no details other than to cite his ‘desire to protect the rights of depositors and preserve state assets’. 

He also indicated that Souaid ‘must adhere, as of today, to the financial policy of our reformist government... to negotiate a new programme with the International Monetary Fund, restructure the banks and present a comprehensive plan’ to preserve the rights of depositors. 

Lebanese analysts have highlighted Souaid's close ties to the failing banking sector and to members of Lebanon's entrenched ruling class, leading some experts to be sceptical of his reformist credentials. 

‘The cabinet appointed Karim Souaid as governor of the central bank,’ the official national news agency reported. 

Born in 1964, Souaid officially takes up the post after the term of former boss Riad Salameh expired in July 2023 with no successor appointed. 

Divided politicians have since failed to agree on a permanent replacement for Salameh, who has been accused at home and abroad of financial crimes. 

The first deputy governor, Wassim Manssouri, had been the acting head of the central bank, a post traditionally reserved for a Maronite Christian in Lebanon's sectarian system of shared governance. 

Souaid is the founder and managing partner of Gulf-based Growthgate, according to his biography on the private investment firm's website. 

He says he has previously worked in financial establishments, including HSBC Bank, and has been involved in privatisation initiatives in several Arab countries. 

The Beirut-based think tank Policy Initiative said in a statement issued on Wednesday that the nomination of the head of the central bank ‘would test the new government's commitment to genuine reform’. 

‘The next governor will shape Lebanon's urgent reform agenda, serve as the main counterpart to the International Monetary Fund and participate directly in sovereign debt restructuring negotiations’ together with the Ministry of Finance, it said. 

Lebanon's new authorities must carry out the reforms demanded by the international community to unlock the bailout funds. 

The economic crisis that has been spreading since 2019 has caused the local currency to lose most of its value against the dollar and has pushed a large part of the population into poverty, leaving people without access to their savings. 

Salam also announced that the cabinet approved on Thursday ‘a bill aimed at modifying the legislation on bank secrecy’. 

In April 2022, Lebanon and the IMF reached a conditional agreement on a $3 billion loan package, but the painful reforms required by the 46-month financing programme have not been carried out. 

Earlier this month, the IMF welcomed the new Lebanese government's request for support in addressing the country's serious economic challenges. 

In February, it stated that it was open to a new loan agreement with the country following talks with its recently appointed finance minister. 

Souaid studied law at Saint Joseph University in Lebanon and at Harvard Law School in the United States, according to his biography. 

Reuters reported earlier this month that the US was involved in the selection of the central bank governor. US officials are said to have even interviewed some of the candidates, asking them questions such as how they would combat the financing of terrorism through the Lebanese banking system and whether they would be willing to confront Hezbollah. 

The governor of the Lebanese central bank is appointed by cabinet decree for a six-year term that can be renewed several times, according to the recommendation of the finance minister.