E Marwan Iskandar recently said that it is not realistic to think that Lebanon has not been affected by the global financial crisis, especially considering the public debt; what’s your take on this?
Lebanon proved to be one of the least affected countries in the world because we had, after the election of the president, positive momentum coming from that election that really was more important than the international financial crisis. But definitely, if we didn’t have the global financial crisis it would have been even better. We cannot say we were not affected. We’re seeing right now that the country is witnessing good growth; all the figures on tourism, retail sales, car sales, are much better than last year. I agree with Iskandar when he says we have been affected, but at the same time maybe the statement is not complete, because it’s not saying that we were the least affected. The most important element is political stability and security.
E How will the upcoming parliamentary elections in June affect the banking sector?
There’s always a problem of uncertainty. So for people wanting to make major investments, they don’t want to do it before the period of uncertainty.
E Some believe that by lending the government money, Lebanese banks are perpetuating the country’s debt problem. How much longer can the banks carry Lebanon’s debt?
The banks are important holders of the government debt. But I have to say that the size of the debt compared to the balance sheet of the banks is much smaller. The balance sheets of the banks are growing much faster than the growth of the debt. Also, the equity base of the banks has grown a lot. We always apply pressure on the government to resolve their debt problem and the size of the debt. We believe it’s a major problem, and we don’t think that there’s an imminent short-term pressure that needs to be applied because of the high liquidity that is available. But it is a problem that needs to be resolved. Hopefully the adjustment will happen sooner rather than later.
E Due to the slower pace of lending to the private sector compared to public sector lending, many feel that banks in Lebanon should increase their lending and are pressuring the central bank to lower the interest rates in order to stimulate investment in the private sector. What is your take on this?
Effectively, if you look at the lending to the private and public sector it’s about the same size; they’re equal. There’s no problem lending to the private sector because it is well diversified. There are so many banks in Lebanon that are eager and competing to give more loans. The real ratio of lending to the private sector is among the highest in relation to GDP. We are lending at more than 80 percent compared to GDP, which is a very high level even compared to western nations. It’s not a problem due to the lack of lending; it’s a problem of the lack of opportunities to lend.
E What will happen to foreign remittances into Lebanese banks this year? Will they beat last year’s record of over $6 billion?
The confidence is there and it seems to be it will be a very strong year compared to last year. Until now, it looks like growth will be higher than last year.
E Seeing how Lebanese banks are heavily exposed to government paper and thus largely dependent on government debt, is geographic expansion the solution to reduce dependency and strengthen the sector overall?
Right now Lebanese banks have 220 branches outside of Lebanon — that’s huge. We and other banks have been expanding outside of Lebanon. By next month we will be present in 12 countries.
E If you were to prepare a list of requests for the new government, what would it entail?
They already know of the reforms that are needed. We would like them to apply the reforms to the public institutions, privatization, solving the electricity problem and so on. They know what they have to do. I want them to do what this government and previous governments promised to do but haven’t done because of the [political] situation.