Massive inflows fail to boost productive sectors

People shop in Hamra street, Sunday, Sept. 15, 2013. (The Daily Star/Mahmoud Kheir)

BEIRUT: The massive capital inflow into Lebanon has allowed the country to cope with an economic slowdown, sustain consumer spending and keep the prices of real estate high, economists said, but added that the productive sectors’ share of the cash injection was marginal.

“This capital inflow, which includes remittances from Lebanese expatriates, has allowed the country to stand on its feet and improved the balance of payments and balance of trade. But a very small portion of this cash went to productive sector,” economist Ghazi Wazne told The Daily Star.

According to Central Bank figures, the capital inflow to Lebanon in the first seven months of this year reached some $8.859 billion, an increase of $70 million.

The figure represents nearly 19 percent of Lebanon’s GDP, making the country’s capital inflow to GDP ratio one of the highest in the Middle East.

Traditionally, most of this cash goes to finance the purchase of apartments, bank deposits and families and relatives in Lebanon.

Non-resident deposits in Lebanese banks have allowed these lenders to boost their assets.

Lebanese expatriates are still attracted to the yield on treasury bills although these returns have dropped slightly over the past five years.

Since the crisis in Syria started two and half years ago, direct foreign investments diminished drastically in Lebanon, with investors preferring to put their money in more stable states.

Economists agree that investments in real estate projects do not necessarily contribute to permanent jobs in the local markets.

Wazne said that the capital inflow does not include the hard cash which comes to Lebanon mostly from Africa and some countries in South America.

“Some Lebanese expatriates in Africa bring lot of undeclared cash to Lebanon and all this money is not added to the capital inflow. There is no official information about the size of this cash but some estimates put it at hundreds of millions of dollars,” the economist explained.

Earlier this year, a Parliament committee, working closely with caretaker Finance Minister Mohammed Safadi and Central Bank Governor Riad Salameh, approved a bill to require that cash coming to Lebanon be declared.

The United States and European countries have pressed Lebanon to adopt such legislation in order to verify the origin of cash coming from Africa.

The West fears that some of this cash goes toward financing Hezbollah, which is branded as a terrorist group by Washington.

Nassib Ghobril, the head of research at Byblos Bank, underlined the importance of capital inflows to Lebanon.

“If you calculate on per capita basis, then this amount will reach $1,800 a year for each individual living in the country,” Ghobril said.

He added that this is the highest ratio in developing countries.

“This capital inflow helps consumption, schooling and hospitalization. This cash injection has helped boost the economy to some extent,” Ghobril added.

Nearly 60 percent of the inflow originates from the oil-rich Gulf states, where more than 400,000 Lebanese reside and work.

Saudi Arabia, the United Arab Emirates, Qatar and Kuwait have hired thousands of Lebanese in the fields of engineering, construction, communication and advertising.

The economists downplayed the GCC threat to apply penalties on Hezbollah activists in the Gulf region, assuring that these governments would not target innocent Lebanese.

Sources said that Hezbollah does not have a real presence in the Gulf states because most of their finances come from Iran and other countries.

A version of this article appeared in the print edition of The Daily Star on September 24, 2013, on page 5.




Your feedback is important to us!

We invite all our readers to share with us their views and comments about this article.

Disclaimer: Comments submitted by third parties on this site are the sole responsibility of the individual(s) whose content is submitted. The Daily Star accepts no responsibility for the content of comment(s), including, without limitation, any error, omission or inaccuracy therein. Please note that your email address will NOT appear on the site.

Alert: If you are facing problems with posting comments, please note that you must verify your email with Disqus prior to posting a comment. follow this link to make sure your account meets the requirements. (

comments powered by Disqus



Interested in knowing more about this story?

Click here