BLOM Chairman Saad Azhari Wednesday underlined the importance of the formation of a Cabinet as a prelude to solve the economic crisis in Lebanon which has affected all sectors.
Speaking at Le Gray Hotel following a presentation by BLOMINVEST on the main economic indicators, Azhari said the Lebanese banking sector is sound and the Lebanese currency is stable thanks to the foreign currency reserves held by the Central Bank.
“However, if a new government is not formed to subsequently implement the necessary reforms required by CEDRE conference, the entire economy will continue to perform poorly and the conditions of the citizens will be more difficult,” the chairman told reporters.
Many bankers and economists have repeatedly called on politicians to cast their differences aside and form a government as soon as possible to tackle all the economic woes confronting the country.
Experts believe that Lebanon’s GDP growth will continue to slip if a newly formed Cabinet proceeds aggressively with reforms.
Azhari stressed that the banking sector was moving on the rescue line without violating the laws or regulations set by the Banque du Liban.
He reminded that Lebanese banks have helped the previous governments in their pursuit to reduce the budget deficit.
Azhari added that banks subscribed to $4 billion Eurobonds with zero percent interest after the Paris II conference.
Azhari dismissed reports that Lebanese banks are making huge profits, noting that these profits are still less than 9 percent of the total assets and deposits of the lenders.
He also refuted claims that the yields collected by banks from the government bonds were very high.
“These reports are not accurate, because the state issues bonds with interest less than the cost borne by banks, forcing the central bank to provide incentives to encourage banks to buy these bonds,” Azhari said. He added that banks continued to support the government, noting that assets of the banking sector are three times the size of the country’s GDP.
Azhari stressed that BDL, with the support of the commercial banks, is able to calm the situation until the state is able to implement the required reforms.
He explained that the financial institutions aimed to gain time effectively in light of the lack of cash flows and foreign investments after 2011, which prompted the Central Bank to compensate for operations able to provide funds to avoid a problem.
“I am optimistic about the future, and I do not think politicians will miss the opportunity of CEDRE, which translates the commitment of global institutions to infrastructure projects, which is the most effective way to move the economy, create new jobs and boost growth,” Azhari said.
“There is a golden opportunity for Lebanon: the international community, with $ 11 billion, is able to improve its infrastructure with low interest, and it is good that the funds are conditioned by reforms to reduce the deficit,” he added.
Azhari also denied the existence of a liquidity crisis in the banking sector. “Liquidity is available, and BDL is supportive of banks and is able to defend the lira with foreign assets which, according to its latest data, reached about $43.5 billion,” he added.
But despite the negative economic indicators and slow GDP growth, Azhari remained confident that the country is able to overcome all the problems if there is a strong will.
“Lebanon is not a poor country, it has human capabilities and a good economy, but it needs better management,” he added.
According to the presentation made by Dr Fadi Osserian, the director general of BLOMINVEST Bank, Lebanon’s GDP growth is expected to shrink to 1 percent in 2018.
He also added that the tourism sector, one of the main driving forces of the economy, improved slightly this year but this improvement was not sufficient to check the economic slowdown.
Osserian noted that the balance of payment deficit in the first seven months of this year reached $3.3 billion compared to a deficit of $1.9 billion in the same period of 2017.
“The accumulated balance of payment deficit since the Syrian crisis broke out reached $13.3 billion,” he added.