The International Monetary Fund believes Syria’s civil war has so far had only a moderate impact on the economy of neighboring Lebanon, and is more concerned about weak policy-making by the Lebanese government, the IMF's regional head said on Tuesday.
“So far, the Lebanese economy has weathered external shocks relatively well. If you look at deposits and reserves, they are continuing to be robust,” Masood Ahmed, director of the multilateral lender’s Middle East and Central Asia department, said in an interview in Doha.
“Our outlook for Lebanon is that it is more affected by the fact that there has been some slowdown in investment within Lebanon due to policy paralysis there, and less so from the direct effect from Syria.”
As of July, residents’ private sector deposits in Lebanese commercial banks had risen 4 percent since the end of last year, while the central bank’s currency reserves had dropped 4 percent, according to central bank data.
But businessmen and private sector economists complain the Lebanese government is slow to reform state finances, improve the country’s infrastructure and take other steps to stimulate economic growth. One reason is sectarian tensions within the government, which have been worsened by the war in Syria.
Lebanon has traditionally had close trade and financial links with Syria. Ahmed said it was difficult to estimate the effect of the conflict on the Syrian economy because the IMF had not had direct access to data on Syria for more than a year.
“We only have secondary data, but it all points in the same direction: the economy as a whole has shrunk; it has been affected by the oil export sanctions.
“You see it also in pressure on the currency reserves. To say how much is something that we’re struggling with right now.”
Ahmed added, “Syria is a human tragedy, and there is enormous cost that comes with that. While the problem is clearly one that has effect on its neighbors, the main cost is being borne by the Syrian people themselves.”
The IMF official also said the lender might reach an agreement by the end of this year on a loan to Egypt. Cairo has asked for a $4.8 billion loan program.
“We expect to have a technical team visit Cairo in the coming weeks to continue the negotiations. The timing of their visit will be as soon as the Egyptians are ready to receive a team.
“We anticipate if all goes well, we should be able to complete it by the end of this year. We’re working on that basis, but how long it takes will be a function of how the negotiations go.”