Lebanese bankers optimistic while FDIs fluctuate
In a survey* of 50 Lebanese bankers from three prominent banks; Bank Audi, First National Bank and Blom Bank; 70 percent of respondents would invest in Lebanon; despite the government’s struggle to score foreign direct investments (FDIs) over the past year.
Earlier this year, the Lebanese government released a budget for the second time after a 12 year gap as a way to attract foreign direct investments, in light of the global decline in receiving FDIs.
As a result, Lebanese Prime Minister Saad El Hariri was able to secure funds amounting to $17bn in the Paris IV conference, that was held in April, as a stepping stone to revive the country’s infrastructure.
Nabil al-Jisr, President of Lebanon’s Council for Development and Reconstruction said that the funds will support about 250 projects in water, sanitation, electricity, transport and telecommunications over the span of 12 years during his speech in the Grand Serail a week following the Paris IV conference.
However, Lebanon is the third most indebted country in the world with a debt-to-GDP ratio of 150 percent, allowing the country to seem less attractive to foreign investments. For that reason, the Central Bank of Lebanon responded through increasing interest rates by more than 2 percent in one year in order to encourage Lebanese Pounds deposits; as a way to safeguard the 20 year record of stability in the Lebanese Pounds to US Dollars foreign exchange rate.
The spike in interest rates could be one reason for the month-to-month fluctuation of the FDIs, however, other reasons are evident as well. One example is that the monopolizing or corrupt nature of the commerce sector in Lebanon has disallowed brand new players from entering the country’s corporate sphere.
According to an anonymous business analyst, the variation in the FDIs is due to the variation of the SOLIDERE stock, since it is the only public company, thus constituting a large portion of the FDIs.
“The variation comes from various factors including the sudden change in board of directors as well skepticism and doubt on what SOLIDERE is going to do next,” he said.
Additionally, the political environment has caused a stir for investors especially since the Cabinet hasn’t been formed yet even though Parliamentary elections were held in May.
Thus, until this government is formed and Lebanon shows a true sense of stability, FDIs will continue to fluctuate regardless of the Lebanese citizenry’s optimism.
