Lebanon’s government announced Tuesday that a New York-based company will carry out a forensic audit of its central bank accounts to determine where massive amounts of money went in a country on the brink of financial collapse.
The audit “will represent a drastic transformation on the path to uncovering what happened at the financial level in terms of waste and theft,” Lebanese Prime Minister Hassan Diab told the cabinet.
Alvarez & Marsal will undertake the audit, according to Lebanese President Michel Aoun's office Tuesday. The New York firm, a turnaround specialist, worked with Lehman Brothers after the investment bank filed for bankruptcy.
The government also contracted two other companies, KPMG and Oliver Wyman, for traditional accounting audits, said the presidential palace.
Lebanon’s protracted economic crisis worsened after mass demonstrations began in October, with millions of Lebanese protesting persistent corruption and economic mismanagement. When the COVID-19 pandemic hit the country in March, the country locked down and the government defaulted on its sovereign debt for the first time.
Lebanon’s $90 billion in debt is about 170% of its GDP. The government had been calling for a forensic audit into the central bank’s accounts since the March default.
The lira has lost 80% of its value since October. Banks use informal capital controls to limit cash withdrawals and stop people from transferring money abroad, preventing many from leaving. Poverty and food insecurity are on the rise.
Tuesday’s announcement came after weeks of delays, as the Lebanese government rejected some companies over alleged links to Israel. Alvarez & Marsal was cleared by Lebanon's General Security Directorate.
Lebanon has been in talks with the International Monetary Fund since mid-May, but a deal looks increasingly unlikely. Two members of Lebanon’s team in the negotiations resigned recently as politicians continue to downplay the central bank’s losses.
The IMF projected in April that the Lebanese economy would contract by 12% this year.