Lebanon finance minister urges banks to cut interest rates

Lebanon’s finance minister urged the country’s banks on Friday to reduce interest rates to help the economy and offered reassurances that bank deposits would not be touched as the country wrestles with a financial crisis.

Lebanon’s new government, which still must win a vote of confidence from parliament, faces a liquidity crunch that has fueled inflation, weakened the Lebanese pound and shaken confidence in banks, which have imposed informal capital controls.

Finance Minister Ghazi Wazni called on the Association of Banks in Lebanon (ABL) “to work to reduce interest rates in the coming period in order to spur economic activity and ease the burden on public finances,” his office said in a statement issued after the minister met with the association.

The statement cited ABL chairman Salim Sfeir as saying the meeting with Wazni “was very positive. We exchanged ideas, but no decision was taken,” Sfeir said.

A senior banking source told Reuters that while no decision was taken, the direction was to reduce interest rates.

The central bank had told commercial banks in December to cap their interest rates on deposits in foreign currencies at 5 percent and to cap the rate on Lebanese pound deposits at 8.5 percent.

The outgoing economy minister, Mansour Bteish, said earlier this month that Lebanon must bring interest rates down drastically as a first step towards rescuing its economy.