Le­banon cri­sis po­lit­i­cal, not mon­e­tary: Salameh

With strong liq­uid­ity, in­ter­na­tional sup­port, sta­bil­ity can pre­vail, BDL gov­er­nor says

The Daily Star (Lebanon) - - FRONT PAGE -

BEIRUT: Cen­tral Bank Gov­er­nor Riad Salameh Mon­day re­it­er­ated that the mon­e­tary sit­u­a­tion in Le­banon is still un­der con­trol de­spite the res­ig­na­tion of Prime Min­is­ter Saad Hariri more than a week ago.

Speak­ing to Bloomberg TV dur­ing a visit to Lon­don, Salameh stressed that the cri­sis in Le­banon is po­lit­i­cal and not mon­e­tary.

He as­sured that Le­banon and Banque du Liban in par­tic­u­lar have taken proac­tive mea­sures to weather crises as liq­uid­ity in lira and for­eign cur­ren­cies is high in the bank­ing sec­tor and Cen­tral Bank.

“There are also pos­i­tive po­lit­i­cal fac­tors trans­lated through the steps taken by the pres­i­dent of the repub­lic to pre­serve Le­banon’s unity and to co­op­er­ate closely with the in­ter­na­tional com­mu­nity that sup­ported Le­banon through state­ments is­sued by the United States and Eu­rope. So thanks to the strong liq­uid­ity sit­u­a­tion and in­ter­na­tional po­lit­i­cal sup­port, we hope sta­bil­ity will pre­vail in Le­banon,” Salameh told Bloomberg TV.

He added that thanks to the fi­nan­cial en­gi­neer­ing by the Cen­tral Bank, the for­eign as­sets at BDL had risen to a his­toric record while to­tal cus­tomer de­posits in com­mer­cial banks in Le­banon in­creased by $11 bil­lion last year, or 6 per­cent, com­pared to 2015.

Hariri’s state­ment Sun­day that he plans to visit Le­banon very soon has also im­proved the prices of sov­er­eign eu­robonds, ac­cord­ing to Reuters.

But this dec­la­ra­tion did not re­flect pos­i­tively on the prices of Solid­ere shares, which fell by an av­er­age of 1.5 per­cent Mon­day.

Bankers say that the re­turn of Hariri to Le­banon would give the mar­ket a badly needed shot of con­fi­dence and this could be trans­lated into a bet­ter growth in de­posits.

Salameh said re­mit­tances to Le­banon now to­tal close to $8 bil­lion a year, $1 bil­lion of which comes from Le­banese work­ing in the Arab Gulf states.

The In­sti­tute of In­ter­na­tional Fi­nance also warned Hariri’s res­ig­na­tion may plunge Le­banon into an­other pro­tracted po­lit­i­cal stale­mate that could weigh on the econ­omy.

“For­eign and lo­cal in­vestors need a func­tion­ing gov­ern­ment and po­lit­i­cal sta­bil­ity. How­ever, the cur­rent geopo­lit­i­cal en­vi­ron­ment, af­ter the de­feat of ISIS [Daesh] in Syria and Iraq, may be more fa­vor­able to the Le­banese econ­omy, IIF added.

But IIF said it has re­vised its growth fore­cast for 2018 from 2.9 per­cent to 1.8 per­cent on the be­lief that the Par­lia­ment and pres­i­dent will fail to form a unity gov­ern­ment.

“We ex­pect no re­course to vi­o­lence be­tween the two Mus­lim com­mu­ni­ties even if the col­lapse of the gov­ern­ment leads to a pro­tracted po­lit­i­cal cri­sis. Also, our base­line sce­nario as­sumes no war be­tween Hezbol­lah and Is­rael,” IIF said.

Echo­ing the as­sur­ances of Salameh, IIF said that there is no con­cern that Le­banon’s na­tional cur­rency will be af­fected by the po­lit­i­cal vac­uum in the coun­try.

‘The con­fi­dence in the Le­banese pound will re­main strong’

“The con­fi­dence in the Le­banese pound will re­main strong and the peg to the dol­lar will be main­tained, sup­ported by am­ple in­ter­na­tional re­serves, a strong bank­ing sys­tem and loyal de­pos­i­tors from [the] Le­banese di­as­pora. Note that the Le­banese pound re­mained sta­ble since 1999 and growth in de­posits stayed pos­i­tive dur­ing pre­vi­ous po­lit­i­cal episodes and se­cu­rity dis­tur­bances, in­clud­ing the as­sas­si­na­tion of Prime Min­is­ter Rafik Hariri in 2005, the war with Is­rael in July 2006 and the po­lit­i­cal vac­uum, with no pres­i­dent, from May 2014 to Oc­to­ber 2016,” IIF said.

It added that de­pos­i­tors’ com­mit­ment to Le­banon will re­main strong, mo­ti­vat­ed­byadeep­trustinthe­fi­nan­cial sys­tem and the per­ceived sta­bil­ity of the fixed ex­change rate regime.

“De­posit growth may de­cel­er­ate from 7.1 per­cent in Septem­ber yearon-year to 5.2 per­cent at end-2017 and 4.7 per­cent by June 2018 … If a unity gov­ern­ment is formed … growth in de­posits will be much higher,” IIF said. –

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