Lebanon's financial system one of region's strongest

Lebanon's private banking system is one of the strongest in the Middle East, the Oxford Business Group research organisation says.

Banks' assets up

But public debt weighs heavily on Lebanese economy

Frank Kane

Lebanon's private banking system is one of the strongest in the Middle East, the Oxford Business Group (OBG) research organisation says.

"At of the end of August, commercial banks in the Lebanese market had combined assets of US$124.6 billion (Dh457.65bn), up 16 per cent year on year, and private sector deposits of $102.7bn," said OBG.

But the country's macro-economic progress continues to be hampered by high levels of public sector debt, largely an overhang from the "fiscal disarray" of the civil war and its aftermath.

"Reflecting political and macroeconomic uncertainties after the 1975-1990 conflict, the country was given only limited access to international capital markets and had to resort to domestic markets to finance its budget deficit," said OBG.

The IMF said recently the Lebanese government needed to balance plans to boost infrastructure investment with measures to alleviate public debt, which had climbed to $51bn, or 148 per cent of GDP, by the end of last year.

"The need to periodically refinance this large stock of debt is a source of vulnerability, despite the country's dedicated and resilient investor base," said the IMF.

Last month, Moody's Investors Service released an updated credit opinion on Lebanon that said despite the potential for political instability, the state had an excellent track record of servicing its debt, and the backing of the country's finance sector helped to maintain fiscal stability.

"Lebanese commercial banks, the government's primary creditors, remain willing and able to purchase and roll over government debt given continuing growth in bank deposits," said Moody's.

Barclays Capital said one of the key challenges for the Lebanese financial sector was to roll over almost $4.8bn of foreign currency debt in the next 16 months, of which $1.45bn would fall due this month.