Government asserts Lebanon is unaffected by financial crisis

Sa'ad Dhahir, Beirut
For Al-Shorfa.com
2008-12-02

Lebanon’s prime minister asserts that precautionary measures taken by the Central Bank in cooperation with the private banking sector have safeguarded the Lebanese economy from the international financial storm.

Lebanese Prime Minister Fouad Siniora said that Lebanon remains unaffected by the global financial crisis thanks to a series of measures taken by the Central Bank in cooperation with the Lebanese private banking sector. Member of Lebanon’s Association of Banks Makram Sadir explained that, "These were precautionary measures taken a while ago by the Governor of the Bank of Lebanon Riyadh Salameh, the Banking Control Commission and the Association of Banks. The governor of the Central Bank became aware of the mortgage crisis early and imposed loan limits on real estate."

According to Sadir, there is a belief in banking circles that, "Lebanon's avoidance of the global crisis constitutes a real chance to direct the path of international and financial investment in Lebanon.” The optimism of those in the banking sector is evident in their expectation that, as Sadir said, "Lebanon would achieve record investment figures, and be a safe haven for funds from the U.S., Europe and the Gulf states."

Sadir went on to reveal that, "The funds transferred in the last few weeks to Lebanese banks after the crisis exceeded US$550 million, which has helped raise the deposit rate in them. These transfers have raised the Central Bank's reserves to their highest level ever, estimated at $18 billion, with total deposits in Lebanese banks exceeding more than $80 billion."

Lebanon has also benefited from the fall in price of oil derivatives. Lebanon's electricity company (Electricite du Liban, EDL) costs the state more than $1.2 billion in losses per year through its own weaknesses and because it depends on petroleum to run generators. According to economists, the reduction in the price of oil will reduce the amount of aid to Lebanon promised by European and Gulf states at the recent Paris III donors’ forum.

Sadir thinks that, "The decision of donor not to honour their Paris III commitments is one of the indirect effects of the global crisis on Lebanon. Lending restrictions imposed by some banks and companies abroad may also have a negative impact on the incomes of Lebanese living outside the country and limit remittances to their families which benefit the Lebanese economy as a whole.”

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