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Salameh warns against increase in borrowing costs

Minister Ali Hasan Khalil, right, meets Central Bank Governor Riad Salameh in Beirut, Tuesday, May 20, 2014. (The Daily Star/Dalati Nohra, HO)

BEIRUT: Central Bank Governor Riad Salameh Tuesday warned of grave economic and social consequences if interest rates surged.

“I came here [to the Finance Ministry] to discuss the management of Lebanon’s public debt which is handled by the Finance Ministry. It is important that the needs, which will be financed from the public debt, do not add pressure on lending capabilities of the private sector and do not create additional pressure on the borrowing interest rates. A rise in interest rates will have negative economic and social consequences,” Salameh told reporters after meeting Finance Minister Ali Hassan Khalil.

Salameh and Khalil reviewed the possible impact of the revised salary scale on the monetary situation and the Lebanese pound.

But Salameh said he was not worried about the monetary situation.

“Monetary stability is continuing and will continue. The markets are relaxed and the Lebanese pound is stable and there is no fear. We have capabilities and the will to preserve the stability,” the governor explained.

Salameh declined, however, to comment on the discussions over the salary scale.

“I won’t talk about the salary scale which is now in the custody of the lawmakers and parliament. This [subject] is outside the jurisdiction of the Central Bank,” Salameh added.

Responding to a question, Salameh said the debt-to-GDP ratio could rise further if growing expenditures were not matched by a growth in the GDP.

“This is definitely negative and I hope [officials] handle this matter in a responsible manner.”

For his part, Khalil acknowledged that the public debt was rising.

“Public debt indicators are on the rise. Today we have discussed some of the revenues, but we are still confronted by big challenges due to the rise in spending and fall in revenues,” the minister said.

“I would like to stress that there is no fear on the monetary situation. But we surely must continue to treat the financial files,” Khalil said.

“The public debt has reached $65 billion and is rising, especially with the projected spending this year,” the finance minister added

He stressed that the election of a president would boost the confidence of investors in Lebanon.

“In our studies, we have projected a growth of 2.7 to 3 percent this year and this is a logical ratio under the current circumstances and it may even go higher if the situation becomes more stable,” he added.

He renewed support for the salary scale but in a rational manner and in a way that balances between spending and revenues.

 
A version of this article appeared in the print edition of The Daily Star on May 21, 2014, on page 5.

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Summary

Central Bank Governor Riad Salameh Tuesday warned of grave economic and social consequences if interest rates surged.

Salameh and Khalil reviewed the possible impact of the revised salary scale on the monetary situation and the Lebanese pound.

But Salameh said he was not worried about the monetary situation.

Salameh declined, however, to comment on the discussions over the salary scale.

Responding to a question, Salameh said the debt-to-GDP ratio could rise further if growing expenditures were not matched by a growth in the GDP.


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