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Salameh unveils Lebanon stimulus plans

Central Bank Governor Riad Salameh participates in the opening of the London stock exchange, Monday, Nov. 26, 2012. (The Daily Star/HO)

LONDON: Lebanon’s Central Bank is planning a stimulus package to kick-start the economy, which has been hit by the conflict in neighboring Syria, the country’s Central Bank governor said Monday.

“The Syrian unrest has affected the overall investment and consumer environment,” Riad Salameh told Reuters in an interview on the sidelines of a Lebanon investment day at the London Stock Exchange.

“The Central Bank is aware that there is less external demand on the Lebanese economy and is preparing to launch a stimulus package that would include housing loans, loans to the productive sector and loans for the energy substitution sector.”

Salameh said he did not yet have details of the size of the package, but would be able to give more information by the end of the year.

Civil war in Syria is taking its toll on several sectors of the economy of Lebanon, where exports have tumbled 12 percent.

Domestic instability has also taken its toll on the economy, with tourism revenues falling as much as 15 percent after Gulf countries warned their citizens to stay away from Lebanon.

The housing loan support would be for new loans, and the program would be in place for at least a year, Salameh said. He reiterated recent comments that Lebanese growth will be around 2 percent this year, but declined to give a forecast for next year.

“The IMF and other agencies’ expectations are for us to have growth next year, maybe the same as this year.”

He said the budget would have a primary surplus this year, and deposits have grown at a rate of 7 percent in 2012, mostly from the domestic depositor base.

Inflation was likely to reach 6 percent this year, however, with a target for next year below 4 percent, Salameh added.

He said a recent debt exchange offer of over $1.5 billion in dollar debt due 2013 had resulted in around $800 million of new issuance and around $750 million of debt exchanged into bonds maturing in 2018, 2023 and 2027.

There were no immediate plans for further issuance, Salameh said.

“For the time being, we do not have any [bond] issue on the calendar.”

Lebanon’s pound operates under a managed currency regime, but there has been no need to defend it this year.

“We did not intervene selling [dollars] in the market since Aug 2011, we have been buyers of the dollar in the market, for this year we have purchased over $1.5 billion,” Salameh said.

In the energy sector, Lebanon’s industry is struggling under daily three-hour power cuts in the capital, which have caused protests. In outlying areas, daily cuts can last 12 hours a day or longer.

The delivery of the first of two electricity-generating barges from Turkey, which the government promised would boost supply, has been delayed because the government has failed to pay.

“I know that things are progressing in terms of getting these barges starting,” Salameh said.

Lebanon has in the past offered winter fuel subsidies. Egypt and Jordan announced in recent weeks that they would cut subsidies for fuel, with the latter witnessing violent street protests on the news.

“Usually the government decides just for the period of the winter to provide certain subsidies on fuel that is used for heating to allow the people to heat their homes,” Salameh said.

“It has not been decided yet whether they’ll do it.”

 
A version of this article appeared in the print edition of The Daily Star on November 27, 2012, on page 5.

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