Banque du Liban (BDL), Lebanon’s central bank, makes a curious claim on its website. Under “Monetary Overview” in the “About Us” section, the bank says that, beginning in 2013, it “resorted to unconventional monetary policy tools to stimulate internal demand and sustain the country’s growth and job creation potential.” Here the bank is referring to stimulus packages that have pumped millions of dollars into the economy over the past three years. What’s curious is the bank’s definition of its actions as “monetary policy” ‒ which the stimulus packages are decidedly not. In the absence of real governance and policy making in recent years (the only two laws Parliament passed in 2013 postponed parliamentary elections and extended lawmakers’ terms), the bank has stepped in to help spur economic growth. A stimulus package is economic policy, not monetary. Alain Bifani, director general of the Ministry of Finance who sits on the board of the central bank, admits that “in absolute terms, [one] is right” to say lawmakers should have directed the bank to offer a stimulus instead of BDL acting on its own. However, he claims that “as long as [the bank] is doing something that is good for the stability of the economy and the system, this is part of its mandate. It is not the usual tool, but it is something that is being welcomed by all players.” While the legal argument may be open to interpretation, no one is complaining about the stimulus money. Indeed, for the past few years, real estate developers have credited it with helping keep the sector afloat.
Available data suggest that the stimulus packages have contributed to consumer demand for housing loans, but the exact amount of that contribution is impossible to identify. Real estate is only one sector the stimulus targeted. On its website, the bank says its goal is supporting “housing, education, renewable energy projects, innovative projects, research & development ventures, entrepreneurship and other productive sectors of the economy.” Data to assess how other sectors have benefited from the stimulus is nonexistent. That said, BDL claims “the stimulus packages of 2013 and 2014 proved to be successful, contributing around 50 percent of real gross domestic product growth.” The bank did not respond to an interview request seeking validation of that claim. During a November presentation to launch the fall 2015 Lebanon Economic Monitor ‒ a World Bank publication ‒ Wissam Harake, an economist with the bank, noted the stimulus packages have had a positive economic impact, which he did not quantify. When Executive pressed him after the presentation on whether the World Bank shared BDL’s view on the packages’ growth contribution, he chose a diplomatic answer. “We haven’t made an exact estimation. We’ve heard what you heard from the central bank, but we certainly think the stimulus packages [are] one of the few drivers of economic growth.”
While it may have helped growth, in both 2013 and 2014 the stimulus money was not fully deployed. Executive reported in January 2014 that, of the $1.47 billion in stimulus money for 2013, some $468 million went untapped. Speaking of the stimulus money for 2015, BDL’s website says the total amount is “$1 billion, coupled with the funds revolved from 2014.” And the stimulus is not the only central bank initiative with deployment issues. In August 2013, the bank approved Circular 331, which guaranteed 75 percent of commercial bank investments into startup companies and venture capital funds. While the decision theoretically freed up $400 million for investment, only around $20 million had been tapped by November 2015. Again, however, the private sector is happy with 331 and hopes it will significantly expand Lebanon’s entrepreneurship ecosystem.
A nudge in the right direction
In addition to pumping cash into the economy, in October 2015 the central bank also threw a lifeline to leveraged companies struggling to repay their loans in the form of basic Circular 135. The Ministry of Finance’s Bifani explains that the circular “doesn’t impose anything. It is just putting the framework for arrangements that can happen between the lender and the borrower.” He adds, “if you have an account that is not performing properly, you have here a framework for banks and borrowers under which they can agree on giving more space for the borrower to be able to reorganize its activities.” While the circular does not target a specific sector, real estate developers welcomed the news.
In late 2015, BDL governor Riad Salameh announced the bank will launch a $1.5 billion stimulus package in 2016. How much longer the bank will be alone in pushing pro-growth economic policies, however, is anyone’s guess.