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The Finance and Budget Committee highlighted two legal violations in the withdrawal of Special Drawing Rights (SDR) funds allocated to Lebanon by the International Monetary Fund (IMF) in September 2021.
The parliamentary Finance and Budget Committee decided to refer the issue of the disbursement of Special Drawing Rights to the Court of Auditors, due to infringements committed by the Executive.
The committee met on Monday morning, in the presence of caretaker Minister of Finance Youssef Khalil and the second Governor of Lebanon’s Central Bank (BDL) Bachir Yakzan, to discuss the issue of SDRs allocated to Lebanon in September 2021 following a decision by the Board of Governors of the International Monetary Fund (IMF) to address the COVID-19 pandemic and its negative effects on global economies.
At the time, it was decided to distribute SDR allocations to support the liquidity of member countries, particularly the poorest. Lebanon’s share was 607.2 million SDR units, which it sold for around USD1.140 billion. The government deposited this sum in a special account opened for this purpose at the Central Bank.
The committee’s discussion focused on the legal aspects of these expenditures and the responsibility of the government and the Central Bank for approving them, without taking into account the provisions of the relevant laws.
Unanswered requests
At the end of the meeting, Committee Chairman Ibrahim Kanaan announced that the case had been referred to the Court of Auditors, because “the disbursement of SDR funds by the government was carried out in violation of the law, without the authorization of Parliament.” “No controls are carried out when private accounts are opened at the BDL, outside the framework of the Budget. This is what happened with the SDRs,” he said, explaining that in response to questions from MPs, Minister Khalil indicated that “the disbursements took place on the basis of a decision by the Council of Ministers or in line with notes from the presidency of the Council.”
“This in itself is an offence, because any expenditure must be made on the basis of a law passed by Parliament, which was not the case,” Kanaan added.
Pointing out that all requests from MPs on this issue had gone unanswered, Kanaan indicated that the case had been submitted to the Court of Auditors “because of two main infringements.”
The first relates to “expenditure made without prior control and reference to Parliament, in violation of Article 83 of the Constitution, i.e. they should have been done either through the Budget or under a request for the opening of a supplementary or extraordinary credit.” The second infringement concerns “the opening of a special account with the Central Bank.”
The MP stressed that the government should reveal the basis on which it had disbursed around one billion and 140 million dollars belonging to Lebanon. He also questioned “whether it is permissible to open a special account in a bank on behalf of an institution or the government in flagrant violation of the law?”
For his part, the chairman of the Administration and Justice Committee, MP George Adwan, asserted that violations of the law had indeed occurred. He insisted that “piecemeal” spending would push the country deeper into crisis. He considered that what was done on Monday in the committee was part of the restoration of general order.
What happened to the SDRs?
As of April 11, 2022, 8 months after their collection, the balance of the SDR amount was approximately USD1,140 billion. The government had not yet spent any of it. Since April 12, 2022, SDR amounts begun to be disbursed. Today, only 10% remains, i.e. around USD125 million. Sources at the Ministry of Finance confirmed to This is Beirut that most of the SDRs have been swallowed up by the electricity sector.
Where did these colossal sums go? This is Beirut obtained some figures from sources close to the Ministry of Finance. Among other things, 13.2 million euros were used to pay amounts due to the French Development Agency, USD48 million to pay for medicines for chronic diseases, particularly cancer, medical equipment, milk and raw materials for the manufacture of medicines, USD10 million for the maintenance of essential installations at Beirut International Airport (AIB) and USD6.5 million to remove chemicals from oil installations in Tripoli.
The government justified these expenditures as being “in the public interest.”
It should be recalled that the Ministry of Finance had announced, on September 16, 2021, that it had received its share of the IMF’s Special Drawing Rights, amounting to USD1.139 billion, which it had deposited in its account with the Central Bank. The government of then (full-fledged) Prime Minister Najib Mikati had announced that it would only use this amount to finance an integrated plan to help Lebanon emerge from its crisis, or to finance development projects. Today, however, only around USD125 million of the initial amount of these SDRs remains, which are registered under the BDL’s foreign currency reserve commitments, since these are sums which the BDL cannot use freely and which can only be disbursed at the request of the State.
