Lebanon’s central bank governor has begun receiving applications from banks in the country looking to tap a $1.5bn economic stimulus package it announced earlier this year.
The Banque du Liban announced the stimulus in January as it tries to bolster the economy amid disruption from neighbouring Syria and a deteriorating domestic political situation.
Riad Salameh, governor of the central bank, says he had initially hoped the stimulus plan would add 2-3 percentage points on to 2013 growth levels, forecast to be about 2 per cent. This could now be lower following the resignation of Prime Minister Najib Mikati on 22 March, sparking a political crisis and sapping economic confidence. The government still has not approved a budget for this year.
“Lebanon is exposed to political events that can create setbacks in economic projects, but there is a resiliency and determination in the economy,” Salameh tells MEED. “And I believe that in any case, the stimulus cannot do wrong to the economy, but it can offer support and stability.”
Salameh says the central bank is currently evaluating the first applications under the stimulus plan, under which commercial lenders are offered cheap loans to help lower the cost of borrowing. “Lebanese banks are already liquid – the objective of this is not to provide liquidity. The objective is to provide liquidity at a cheap cost, so banks can lend at lower rates,” says Salameh. So far, demand has been focused on the real estate sector, for funding both large-scale real estate projects and for funding retail mortgages.
Banks in the country have also mostly stopped their operations in Syria, and have reduced their exposures from about $5bn before 2011 to less than $2bn now, says Salameh. “The banks still want to maintain a presence in Syria as the country will have better days, but activities are decreasing and some of them are dormant,” he adds.