BEIRUT: Lebanon’s Central Bank governor said Tuesday he expected no unpleasant surprises for the country’s financial sector in 2013 as he reaffirmed that a recently launched stimulus package for $1.46 billion in loans would boost GDP growth by 2-3 percent.
“The Lebanese banks have completely absorbed the direct impact of the Syrian and Arab crisis in 2012,” Riad Salameh said.
“The profits of the Lebanese banks still managed to be roughly the same as in 2011, despite the economic slowdown. This is a good indicator,” Salameh said during a news conference to launch FARO Lebanon, a new fund for small and medium enterprises.
Salameh voiced confidence that Lebanese banks had sufficiently increased provisions to limit exposure to foreign operations and were now poised for growth.
He said the stimulus package would put the Lebanese economy on track, following stagnation that has persisted since May 2012.
Last month, the Central Bank announced that it would issue LL2.2 trillion ($1.46 billion) in credit facilities to commercial banks at a 1 percent interest rate.
According to Salameh, 56 percent of loans will be for real estate, 22 percent will target productive sectors, 20 percent will target renewable energy, and 2 percent will target education.
The package has become necessary for several reasons, including the tense political situation expected before and during the upcoming parliamentary elections, and the widening deficit in the balance of payments, Salameh explained.
He also said the stimulus package had become necessary after banks exhausted subsidized loans by utilizing free reserve requirements.
Under the plan, Lebanese banks are obliged to place 15 percent of their Lebanese pound deposits and 15 percent of foreign currency deposits in the Central Bank for 0 percent interest.
A big portion of the mandatory deposit requirement is used to offer subsidized loans to Kafalat and other agencies, which in turn give lines of credit to productive sectors with very low interest rates.
Salame said a marginal increase in non-performing loans also encouraged the Central Bank to launch the stimulus package.
“We consider the liquidity injection and reactivating the market necessary steps in clamping down on any increase in non-performing loans,” the governor said.
The Central Bank sees SMEs as major growth engines for the Lebanese economy in the coming years, he added.
“The Central Bank will indefinitely support SMEs, a major source of jobs. These businesses are the key to boosting knowledge and innovation.”
FARO Lebanon will be managed by the Chamber of Commerce of Beirut and Mount Lebanon, Kafalat, and Berytech, and will be chaired by Mohammad Choucair, president of the Beirut Chamber of Commerce.
The seed fund was launched in 2010 in France by the Union for the Mediterranean. It aims to boost the development of innovation and cooperation between companies on both sides of the sea.
Choucair said the fund would offer loans of up to $20,000, adding an initial $500,000 had been invested, with 1 million euros of funding to be awarded soon by the European Union.
“We have not met today to sound the alarm over the state of economy, which has reached a dangerous and critical stage. But our meeting is to challenge this and give hope,” Choucair added.
Eligibility for applying to the fund includes having at least one European or Mediterranean partner.
The FARO fund also offers technical support and financial expertise. Loans will carry a maximum interest of 1 percent with repayments stretched over three years.