The Business Year

Dr. Riad T. Salameh

LEBANON - Finance

Sound Policy for a Sound Polity

Governor, Banque du Liban (BDL)


Dr. Riad T. Salameh has been the Governor of Banque du Liban, Lebanon’s Central Bank, since August 1, 1993. He was reappointed three times for a six-year term of office in 1999, 2005, and 2011. Salameh manages all aspects of the Central Bank and is assisted in his functions by four vice-governors and the Central Council. Salameh attended the Jesuit College of Collí¨ge Notre Dame de Jamhour and graduated with a BA in economics from the American University of Beirut.

What prompted the Central Bank to launch its financial engineering swap operation? The unexpected flow of Syrian refugees has strained already unstable public finances, service delivery mechanisms, infrastructure, and the […]

What prompted the Central Bank to launch its financial engineering swap operation?

The unexpected flow of Syrian refugees has strained already unstable public finances, service delivery mechanisms, infrastructure, and the environment. According to the ILO, an estimated 170,000 Lebanese have fallen into poverty, and the unemployment rate has doubled to around 20%. Overall real economic losses of around USD13 billion have been incurred thus far. The situation was also exacerbated by political paralysis. In effect, the main economic indicators, namely foreign trade, tourism, investment, and consumption, have been steadily decreasing since 2011. As a consequence, the debt-to-GDP ratio has risen to around 144%; the fiscal deficit reached 8% of GDP, aggravated by the absence of a public budget for a decade now; GDP growth has decreased from 8% in 2010 to around 2% today.

What does this swap operation mean for the Central Bank and the economy in general?

One of the chief objectives of the financial engineering BDL undertook was to strengthen the Central Bank’s foreign currency assets. A strong balance sheet is essential to maintaining exchange and interest rate stability, which is in turn necessary to achieve sustainable economic development. After the swap operation, BDL’s foreign currency assets reached a historical record, which confers stability on the Lebanese pound and on interest rates. Other objectives this scheme targeted include beefing up the capital base of banks, increasing the liquidity in local currency, improving the government debt profile by reducing the cost of borrowing, improving the balance of payments status, targeting positive inflation rate below 4%, and improving the country’s rating and outlook.

Lebanon’s economic growth is projected to more than double to 2.5% in 2017. How does BDL analyze this?

BDL’s outlook for the current year is a positive one. We expect economic growth to pick up even further, with estimated growth rates of more than 2% and inflation contained below our 4% target. Moreover, the recent financial engineering scheme has had a positive impact on both the monetary and banking fronts. The balance of payments recorded a surplus of USD1.3 billion in 2016. The banking sector remains strong despite the pressing challenges that took a toll on its advancement. Its performance remains healthy and enduring: total banking activity grew by more than 9% with total bank assets exceeding USD205 billion in March 2017. Customer deposits have increased by around 8% to reach a new high of USD174 billion, with additional funds of around USD10 billion entering the banking sector. Lending activity recorded a 5.4% growth during 2016, with total credit to the private sector exceeding USD58 billion in March 2017. Our stimulus packages have been renewed for the fourth consecutive year with an average of USD1 billion per year.

Currently, FDI in Lebanon accounts for 6.7% of national GDP. In which sectors do you foresee the most potential?

The Lebanese knowledge economy has been a new and important driver of economic growth, which is why BDL has focused on developing this sector by increasing the margin of funds that banks can dedicate to financing this sector and authorizing them to invest, with BDL’s guarantee, up to 4% of their own funds, compared to 3% previously. After only three years, the Lebanese knowledge economy has attracted 800 start-ups, created 6,000 jobs, and increased national wealth by around USD1 billion. We expect this sector to grow by around 7-9% per year in the next three years.

What benefits does Lebanon offer investors, and how is BDL working to attract these flows?

BDL’s efforts have been channeled in the past 20 years to building a prudent financial model, which has inspired confidence in the system. It has been dedicated to strengthening monetary policy, pushing modernization forward, achieving sustainable economic growth and financial sector stability, and fostering transparency. Our banking model itself is the main attraction for investment, with proven resilience and competitiveness over time.



You may also be interested in...

Mahmoud Sobh

LEBANON - Tourism

Open Doors


General Manager, Zaatar w Zeit

Hadi el Khoury

LEBANON - Tourism

Taste Test


General Manager, Chili’s BEIRUT

View All interviews