A dissenting voice

Stimulating Lebanon

The Central Bank plans to spend $1.46 billion in hopes of jumpstarting the sputtering economy. In the first of our monthly roundtable discussions tackling lebanon’s top issues, We asked six experts whether it’ll work

A fter a year of internal security troubles, a poor tourism season and the closure of scores of restaurants and other businesses, Lebanon bid farewell to 2012 with a deficit in the balance of payments in excess of LL2 trillion and welcomed the new year amid fears that companies will once again be hindered by political and security challenges as the crisis in Syria looms large over the economy.

In order to stimulate the stagnant economy, the Central Bank put together a financial plan that is expected to inject LL2.2 trillion ($1.46 billion) in loans to commercial banks at an ultra-low interest rate of 1%. Banks will then be responsible for lending the cash to businesses and consumers at a maximum rate of somewhere between 5% and 6%.

The Central Bank hopes the stimulus plan, which earlier reports estimated at LL2 trillion, will help reinvigorate various productive sectors of the economy, the housing market, projects subsidized by Kafalat, renewable energy projects, and research and development ventures.

In its inaugural Roundtable feature, BOLD assembled a panel of economists, businesspeople and other experts to offer their views on the potential effect of the stimulus package on the struggling Lebanese economy.

The Roundtable will be a monthly feature that puts a question on an issue affecting Lebanon before leading thinkers from a variety of backgrounds.

Question For Our Panel: Can the Central Bank bring the economy back to life?

Jad Ab Haidar
Financial Analyst
Credit Libanais

We are confident that the Central Bank’s initiative to inject cash into the Lebanese economy in the form of subsidized loans will provide a boost for the real estate and productive sectors and ultimately spur economic growth. Moreover, we believe that any imminent solution for the Syrian crisis will magnify the impact of the Central Bank’s initiative.

Walid G. Touma
Baraka Holding

It’s a beautiful step by the Central Bank that is always the first to help out the private sector. I’m definitely positive since the Central Bank is motivating the injection of capital in real estate and in the economy. The loans should be encouraged and extra loans should be made available since banks become more confident in giving out loans and consumers are encouraged to take loans with manageable rates.

Georges Corm
Economist, historian and
former finance minister

I don’t have any criticisms for the Central Bank’s measures in theory, since the measures are economically sound and follow in the footsteps of the US Central Bank pumping liquidity into financial institutions. However, there might be business sectors other than construction – as well as some regions within Lebanon – that need public financial support.

Sami Halabi
Journalist and consultant

The Lebanese don’t need more inflationary policies; they need jobs that pay living wages that are not eaten up by inflation. The fact that almost half of the package will reportedly go to housing does not bode well for this prospect given its already over-bloated nature, inflationary effects, and the fact that it creates few local jobs. If money goes to sectors that will have a substantial multiplier effect on productive economic growth that actually creates job opportunities for Lebanese citizens, as opposed to maintaining capital in the upper echelons of society in anticipation of a trickle down effect, then it will have a positive impact.

Adnan El Hajj
Economist and
Assafir columnist

It’s a good step from the Central Bank in economic stagnation to prevent recession. This step will need 12 to 14 months to be used and it would cause a 2-3% growth. Since some sectors like trade and investments are likely to have little growth, these loans might stimulate business activity that would help cover the growth deficit.

Assem Safieddine
AUB’s Corporate Governance Program

The subsidized housing and private sector loans previously supported by the Central Bank proved to be an economy booster in the past. The move from BDL has similar objectives in perspective. On top of boosting the economy through reviving the real estate sector and private sector investments, it is expected to create competition among banks and support the sector at times when its profits are hampered by regional turbulences.

First Published by Bold Magazine in the February 2013 print edition


Author: Sami Halabi

Sami Halabi is a policy consultant who covers a range of policy issues and analyses development programmes, particularly in the Middle East and North Africa. Sami specialises in analysing policies and programmes in order to provide evidence-based recommendations to policy-makers and international development agencies. Sami holds a Master of Public Policy with Distinction from The University of Edinburgh.

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