BEIRUT: Lebanon is planning a $1 billion economic stimulus package for 2015 to maintain growth and support an economy hit by a more than 3-year-old conflict in neighboring Syria, according to the Central Bank’s governor.
Riad Salameh said he hoped the fresh round of stimulus, which follows $800 million in aid this year, would result in economic growth of at least 2 percent next year. The IMF in May forecast Lebanon’s economy to grow by 2 percent this year.
Speaking at the Reuters Middle East Investment Summit, he described Lebanon’s financial situation as “solid,” pointing to foreign reserves he said had reached a historic high of over $38 billion, while gold reserves were at $13 billion.
But the war in Syria, a huge influx of refugees and a domestic political stalemate have hit Lebanon’s economy hard, prompting the Central Bank to introduce a $1.4 billion stimulus package in 2013 and $800 million in aid this year.
“The Central Bank will have another incentive program of $1 billion and we will be aggressively engaged in the promotion of knowledge economy,” Salameh said.
“I will recommend to the central council – and there is a positive view toward this – to [issue] a $1 billion stimulus credit package for 2015 with one percent interest.”
The council is the Central Bank’s policy-making body.
The stimulus packages have comprised low borrowing rates for housing and new projects, including renewable energy, and extended loan terms for small- and medium-sized businesses.
Besides providing housing loans, the new aid will also be allocated to environment and renewable energy projects as well as small projects, Salameh said. “We hope that growth will occur, as a result of this incentive, that is not less than 2 percent.”
Lebanon’s economy grew 8 percent a year between 2007 and 2010, but has been sluggish since the collapse of a unity government and the start of Syria’s uprising in 2011.
Tourism and construction, two mainstays of the economy, have both suffered from Syria’s civil war.
Political instability has scared off wealthy Gulf Arab tourists and some investors.
“Today the Central Bank has foreign liquidity that exceeds $38 billion, which historically [is] the highest, excluding the gold reserves,” Salameh said. “We are launching these incentive programs while keeping an eye [out] that the liquidity we are injecting is not creating inflation or creating a drain on our foreign currency reserves.”
Salameh said the aim of the bank was to maintain the stability of interest rates and the Lebanese pound.
Lebanon has seen violence spill over from Syria, with bombings in Beirut, fighting in the northern city of Tripoli, and rocket attacks on Bekaa Valley towns close to the frontier.
Apart from adding to the strain on electricity and water supplies, the Lebanese resent Syrians for taking jobs, driving down wages and overloading schools and hospitals.
Lebanese officials have repeatedly voiced concern that the growing number of refugees threatens Lebanon’s economy and political stability and said the country needed more resources to address their needs.
Finance Minister Ali Hasan Khalil said Wednesday that the country was getting little international help to ease the impact of the refugees.
Salameh, who has headed the central bank for more than 20 years, echoed those sentiments. He said the international community was not doing enough to help, adding that a trust fund created by the World Bank this year to help Lebanon had received only $30 million so far.