BEIRUT: Central Bank Governor Riad Salameh said Lebanon would settle all its outstanding dues this year, including its $800 million debt that matures end of June.
Speaking at the opening of a conference to mark the 50th anniversary of Banque du Liban at the Phoenicia Hotel organized by First Protocol, the governor assured attendants that all the maturing bonds and eurobonds would be paid on time.
“We [the Central Bank] have over $36 billion in liquidity and we have beefed up our foreign currency reserves. Commercial banks have excess liquidity and customer deposits are growing by 5 to 6 percent compared to last year. All of the foreign currency-denominated bonds have been replaced before their maturing dates,” Salameh said.
He told participants that eurobond spreads had dropped and that Lebanon’s ranking had dropped from 380 basis points to 340.
“For this reason, the market feels that the situation is under control,” Salameh said.
Lebanese banks have snatched up most of the eurobonds issued this year, although this has increased their exposure to the risk of default.
Salameh has personally engineered most eurobond subscriptions over the past few years in a bid to meet all the needs of the Finance Ministry.
There is no sign yet that the banks will stop buying sovereign bonds in the foreseeable future, although international rating agencies have warned lenders against increasing their exposure to the growing public debt.
Salameh reiterated that the Central Bank would protect the economy’s stability and overcome the recent crisis.
“In these circumstances, I would like to confirm that the Central Bank will protect monetary and credit stability in Lebanon,” Salameh said.
The Central Bank’s policies and the conservative banking model increased trust and stimulated economic growth by reducing interest rates, Salameh said.
Salameh mentioned the Syrian refugee crisis in his comments, saying that “it demonstrated the solidity of the national economy.”
“[It proved] that Lebanon has succeeded in confronting the difficult political and security circumstances and was able to bear the burden of over 1 million Syrians,” the governor said.
Concerning the recent developments over the salary scale, Salameh said the “realistic solution is to pay it over five years so that salaries are increased on a yearly basis.”
And of recent failures to elect a new head of state: “The presidential void is an unnatural thing that will hopefully not last long, because it creates pressure on ... the Cabinet and the Parliament’s performance.”
He called on political actors to take responsibility for reviving the country’s institutions, thus helping Lebanon’s economy.
Joseph Torbey, chairman of the World Union of Arab Bankers, hailed the efforts of the Central Bank to protect monetary policies.
He stressed that the Lebanese banking sector had become very stable since Salameh took office 20 years ago.
Torbey criticized the campaign against the Central Bank and commercial banks by the Union Coordination Committee, reminding critics that banks had shored up the economy thanks to their liquidity.
At the end of the ceremony, the First Protocol heads presented Salameh with a gold-plated shield to mark the BDL’s 50th anniversary as well as his 20 years with the bank.