Lebanon’s central bank governor, Riad Salameh, stated this week that the recent reduction in customs duties along with the introduction of the open skies policy “can help GDP growth to reach three percent, if not more,” in 2001, unless distorted by regional instability. He added that banks would also benefit from economic growth as profits in the sector dropped 25 percent in the first nine months of 2000 due to the recession and cuts in interest rates.
Salameh expected that interest rates will remain unchanged in the foreseeable future as the “market is not ready yet for such a move”, but he pointed out that rates could fall if the government manages to privatize the telecoms sector and convert mobile-phone contracts into licenses. Salameh also added that the recent rise in capital inflows and the highly dollarized economy prove that the US investment bank Merrill-Lynch committed a “professional error” by warning its clients of a potential devaluation of the Lebanese pound.
In addition, Salameh expected that after intervention in recent months, foreign currency reserves would be replenished following government eurobond issuances. Concerning the money laundering file, Salameh declared that a draft law is being passed to the Cabinet to agree upon.
A delegation from the IMF is expected to come next January to discuss the measures taken by the government and the Central Bank, and to see if Lebanon could be dropped from the list of 15 countries that were not co-operating in the fight against money laundering. — (Banque du Liban et d'Outre-Mer Sal )
© 2000 Mena Report (www.menareport.com )