Central Bank Renews Audit of Billions in Subsidies and Financial Transfers

The Central Bank has commissioned Alvarez & Marsal to undertake a fresh examination of billions of dollars in financial interventions and transfers distributed to both public and private sector entities during Lebanon's economic crisis.

The audit scope encompasses support programs authorized by successive governments, including transfers and payments amounting to several billion US dollars. The review will cover funds allocated by the Bank of Lebanon to public institutions and government bodies, as well as transfers made to commercial banks through international accounts.

Investigators will determine whether all payments and transfers adhered to legal authorization requirements and established protocols. The examination seeks to verify that funds reached their intended beneficiaries and were deployed for their designated purposes, without diversion, misappropriation, or misuse of public resources.

This assignment carries significant weight within Lebanon's international reform agenda, particularly regarding commitments to the International Monetary Fund. The Central Bank governor announced this approach upon taking office, while the Ministries of Finance and Justice have coordinated efforts to facilitate the tender process.

The investigation addresses a long-awaited accounting of expenditures from Central Bank reserves directed toward fuel, food, consumer goods, and medicine subsidies during the financial collapse. These support programs resulted in the depletion of approximately $20 billion in depositor funds. The audit aims to identify beneficiaries and establish accountability for the waste.

Upon completion, the audit report will furnish the government with documentation necessary for legal proceedings against responsible parties and enhance state credibility in meeting external obligations.

This represents the second engagement for the firm. Alvarez & Marsal previously received a contract from the Ministry of Finance in September 2021, signed by then-Finance Minister Youssef Al-Khalil, to audit Central Bank accounts and determine the financial gap and responsible parties. That report's completion faced delays; it was delivered to Al-Khalil in August 2023 but remained unpublished and was not submitted to the Council of Ministers. The current contract extends through the end of the year.

The investigation extends beyond support programs to encompass all Central Bank transfers to the state, including allocations to the military, Électricité du Liban, the Ministry of Foreign Affairs, and other agencies that experienced unjustified expenditures. It also covers transfers made by banks operating abroad.

Available information indicates that support programs alone squandered approximately $9 billion in government spending. The Central Bank has requested the audit firm investigate fund utilization to provide the Ministry of Justice and Judiciary with evidence supporting prosecutions. The audit's significance lies in its potential to enable the Central Bank to recover state-owed funds once their true magnitude is established through transparent, internationally-standard procedures.

The new audit differs from its predecessor in scope and objectives, which have become more precisely defined. The current examination covers 2019 to 2023, whereas the earlier forensic audit of Central Bank accounts addressed the 2015 to 2020 period.