Will Lebanon's $800 million stimulus actually revitalize the country's economy?

Published November 14th, 2013 - 08:02 GMT
The 2014 stimulus package is supposed to be similar to the 2013 one released by the Central Bank (Marwan Tahtah/Al-Akhbar English)
The 2014 stimulus package is supposed to be similar to the 2013 one released by the Central Bank (Marwan Tahtah/Al-Akhbar English)

The Central Bank governor Tuesday unveiled an $800 million incentive package for 2014 to stimulate the economy and revitalize the real estate and technology sectors.

“This new package is similar to the one we launched this year, which proved to be quite successful,” Riad Salameh said during a lunch ceremony in his honor organized by the Association of Banks in Lebanon.

“We should also focus on strengthening the economy of knowledge, which will secure job opportunities for our youth.”

The package launched by the Central Bank will also allow commercial banks to offer housing loans with very low interest rates.

Salameh wants to utilize any excess cash to keep the Lebanese economy on its feet and prevent a real estate crash.

The governor also brushed off the pessimistic gross domestic product growth predictions by some international organizations and insisted that GDP would grow between 2 percent and 2.5 percent.

“These estimations are based on the census department of the Central Bank although there other projections which say otherwise,” Salameh said.

But the World Bank, the International Monetary Fund and even caretaker Finance Minister Mohammad Safadi have estimated the GDP growth this year at 1.5 percent.

Commenting on Standard & Poor’s downgrading of Lebanon’s local and foreign currency to B- from B, Salameh insisted that the move would have no impact on interest rates and the spreads of sovereign bonds.

“If we want the growth to continue then we need to keep the interest rates stable. The interest rates on housing and consumer loans are connected to the interest rates on the Lebanese bonds. Any rise in interest rates will hurt the economy,” he added.

Salameh reiterated that the Central Bank would continue to preserve its monetary policy and protect the Lebanese pound.

“The Central Bank will continue to be involved in the financial markets and will continue to stimulate growth in Lebanon despite difficult conditions domestically and regionally.”

The president of the Association of Banks, Francois Bassil, who hailed Salameh’s long-standing achievements, warned that the private sector and all the associations in Lebanon would take drastic actions if politicians failed to form a Cabinet soon.

He did not elaborate.

“It is very crucial at this stage to have a Cabinet to tackle different political, economic and social issues. There is no excuse to delay the formation of the Cabinet,” Bassil said.

He said among the pressing issues which the future Cabinet needed to address were the presence of the Syrian refugees in Lebanon, dealing with the oil and gas files and revitalizing all the public departments.

Bassil also warned of grave consequences for the economy if Arab Gulf nationals continued to forgo travel to the country.

He said despite this gloomy picture, the Lebanese bankers who attended the World Bank and IMF meetings in Washington felt a great deal of support from the US Treasury and private American banks.

Bassil emphasized that the Lebanese banks would continue to combat money laundering and terrorist financing.

 

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