BEIRUT: Central Bank Governor Riad Salameh said Thursday that the the lender could not approve Middle East Airlines’ bid to acquire financially troubled Cyprus Airways as this could increase risk.
“Commercially, this matter is left to MEA to assess the acquisition. But in principle the Central Bank, which controls the majority of the national carrier, cannot approve MEA’s acquisition of Cyrus Airways. The duty of the Central Bank is to use its money to protect the monetary and economic situations and for this reason we cannot bear more risks for companies that belong to us,” Salameh told participants at the Arab Economic Forum, which was held at the Phoenicia Hotel.
MEA has been negotiating with Cyprus Airways to acquire either part of the carrier or the entire airline, but details of these talks remained sketchy.
Cyprus Airways officials fear that if they ar unable to find buyers soon then the carrier will have to declare bankruptcy and lay off all remaining staff.
But it remains unclear whether MEA Chairman Mohammad Hout will manage to acquire Cyprus Airways without using any of the Central Bank’s financial resources.
Hout has succeeded in the past to modernize the fleet and buy new Airbus aircraft without the financial banking of the Central Bank.
“Unless MEA becomes a private company, it is difficult for the airline to expand outside Lebanon because this does not suit the role and purposes of the Central Bank,” Salameh explained.
The governor also touched on other issues related to the financial market and monetary system in his speech.
“The objective of the Central Bank is to keep the Lebanese pound stable and for this reason it intervenes to buy Treasury bills to keep interest rates stable and preserve the pattern of lending,” he said.
Salameh said the Central Bank would strive through the management of its liquidity to keep the inflation rate around 4 percent.
He said deposits in foreign currencies in Lebanese banks had increased in the last few months, proving the absence of capital outflow from Lebanon.
Salameh stressed that the situation of the Lebanese banks operating in Syria no longer posed a threat after lending operations in the war-wracked country fell by $5 billion.
“In general, the Lebanese banks have a capital adequacy ratio exceeding 10 percent under Basel III terms,” Salameh said.
Caretaker Prime Minister Najib Mikati also spoke at the forum, outlining the achievements made by his Cabinet in the past two years.
“Among these achievements was to tackle the rampart corruption and waste in public departments; placing fundamental financial controls by setting a ceiling for public debt and budget deficit; improving the infrastructure; improving the environmental legislation and issuance of several laws; paving the way for the private sector to contribute in the production of public services,” Mikati said.
He added that his Cabinet had put a lot of emphasis on developing the promising oil and gas wealth in Lebanon.
“We have completed a comprehensive plan for oil and gas exploration and we have passed the required laws. The execution phase of this plan has drawn international companies which have submitted offers and requests to obtain licenses,” Mikati said.
He emphasized that Lebanon was pinning high hopes on the promised oil and gas wealth.
Mikati heaped praise on the Lebanese private sector, which has played a major role in stimulating the economy: “The private sector has demonstrated its ability to cope with all the circumstances and hurdles and continued the path of growth despite all the challenges and difficulties.”
Head of ESCWA Rima Khalaf gave a bleak picture of the economies of the MENA region.
“Some of the economic problems in these countries are related to the changes that have occurred in these states,” Khalaf said. “Revolutions by nature aim at exiting the current and narrow situation and strive to look to the future.”
She said this transitional stage in some of the Arab countries that were the scenes of revolutions had been previously experienced by central and Eastern European countries, which lost one quarter of their GDPs due to the transitional stage but eventually they saw growth again.
Khalaf warned that Western nations, which were now undergoing economic difficulties of their own, might not be able to provide the necessary economic assistance to some of the Arab countries as they did with the East European countries.
She expressed confidence that Arab countries would eventually overcome their immediate problems.
Khalaf accused some countries, which she did not name, of fomenting civil strife in some Arab countries in order to derail popular revolutions.