Banker: the recovery of deposits in Lebanese banks is expected to decrease

Lebanese bank deposits are expected to recover after a decline in customer optimism after the adoption of the 2019 budget, after the decline of the first five months of 2019, said the president of the Association of Banks of the Lebanon, Salim Sfeir.

Beirut's chief executive, Salim Sfeir, said deposits had fallen to $ 179 billion by the end of May, up from $ 179 billion at the end of December. "We expect a very positive recovery and the market in Lebanon is very resilient," Reuters told Reuters on Monday.

He added that banks would take steps to support the economy over the next four to seven months, including lowering interest rates and giving more loans to certain sectors.

He said the banks had sufficient liquidity and were optimistic about their ability to give the necessary boost to the recovery of the economy. Lebanon, burdened by one of the world's highest debt ratios, finally approved last Friday the 2019 budget, which aims to reduce deficits as part of efforts to ensure the sustainability of public finances in a sustainable manner.

The government embarked on delayed reforms thereafter as the economy stagnated as deposit growth in the banking sector slowed. The sector has long played an important role in financing government and broader economic needs. "These fears and the political debate on the budget are linked," said Sfeir, adding that concerns have been expressed about the need to ask for more interest on their badets and withdraw their deposits. But he said he has estimated in the last 48 hours that the markets and the population are calmer and that transfers from the Lebanese pound to the US dollar are below normal.

The budget aims to reduce the deficit by more than 11 percent in 2018 to 7.6 percent of GDP, although the International Monetary Fund says the deficit is likely to be much higher than expected this year. Sfeir said that the deficit reached was acceptable by Lebanese standards, if not by international standards, but that the effort can be made and that, therefore, the more optimistic the depositors, the greater the flow of capital.

Support foreign exchange reserves

While Lebanon's foreign exchange reserves are in free fall, Lebanese banks have recently launched a new campaign to attract new dollars by offering interest rates of 14% on the significant amounts they will keep. during three years. The dollar is deposited at the central bank.

Sfeir said he was informed that the effort had raised between $ 800 and $ 1 billion, adding that it was a positive sign: the reserves are an additional $ 1 billion and, despite the high cost, they are present, adding that the average interest rates paid on deposits in Lebanon have increased to About 6.8% this year compared with 3.4% to 3.5% the year last, claiming that even if these prices were high, they were in line with those of the market of the region.

"Bonds have also declined by about 5% in the five months since the end of May," he said.

Standard & Poor's and Fitch Ratings are expected to be in Lebanon soon. Sfeir said he hoped to wait for the 2020 budget before taking another step in rating Lebanon's sovereign debt. He concluded by saying that he hoped that they would understand enough patience and that they would badess the situation on the basis of the 2020 budget. He said that the 2019 budget was another good step and that he was expecting a major effort to reduce the budget deficit of 2020.