Beirut-Lebanon’s central bank chief Riad Salameh has said that he will ensure local banks comply with a U.S. law targeting the so-called Hezbollah’s finances.
Salameh said the U.S. law must be enforced to keep Lebanon’s banks within the global financial system and stabilize the hugely indebted economy as neighboring Syria’s civil war hits tourism and growth.
“Of course this (law) has created a lot of tension in the country, and the tension was not good for Lebanon, but overall we have preserved the objectives that we had in mind,” he told Reuters in an interview.
Passed by the Congress in December, the law threatens to bar from the U.S. financial market any bank that knowingly engages with Hezbollah, designated a terrorist organization by the United States. It has led to a standoff between the central bank and Hezbollah, which views it as a breach of sovereignty.
Salameh and the U.S. Treasury have repeatedly said the Hezbollah International Financing Prevention Act is not designed to hurt Lebanon’s economy or to unjustly prevent members of Lebanon’s Shi’ite community from accessing banking services.
Salameh would not comment on how many accounts had been closed so far, or how many were under investigation.
“The process is being respected by the banks and a Special Investigations Commission is looking individually at every request to close accounts that they deem are in contradiction with the law,” Salameh said.
“The banking sector in Lebanon is the cornerstone of stability in the country,” said Salameh.
“Lebanon is funded by its banking sector only.”
“Confidence in the Central Bank remains high and should ensure Lebanon can continue to fund itself,” Salameh told Reuters.
He said the Central Bank will keep stabilizing the economy for “as long as it takes” for the government to become more effective, pass a budget and tackle the structural deficit.
With government debt of 136.7 percent of GDP in 2015, the third-highest among countries rated by Fitch, confidence in Lebanon’s Central Bank – seen as one of the only effective institutions in the weak state – is vitally important.
Salameh forecasts growth of 1.5 to 2 percent for 2016, in line with a World Bank projection of 1.8 percent but far below the 8-9 percent growth rates seen in the years before 2011.