Political wrangling in Lebanon has harmed the economy which is now expected to grow at 2.5 percent, down from an earlier projection of around 5 percent, the caretaker finance minister said on Thursday.
Raya al-Hassan told Reuters that Lebanon saw a limited capital outflow of around 1 percent of bank deposits in January, when Hezbollah and its allies toppled the unity coalition of caretaker Prime Minister Saad al-Hariri.
She said a rising dollarisation rate is causing a liquidity problem in Lebanese pounds, and Lebanese banks are keeping their local currency rather than subscribing to treasury bills.
"There is no worry regarding the stability of the Lira (Lebanese pound) or the stability in the banking sector but there is worry from the reflection of dollarisation and the lack of liquidity, in financing the needs of the public sector," she said. "We finance the deficit from t-bills (in local currency, but) when the banks prefer to save their cash and keep it rather than subscribe in the t-bills then the liquidity available for the Lebanese state to refinance its debt in Lebanese pounds or to provide new liquidity to pay its expenses tightens.
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