New Lebanon government calls for ‘painful economic reforms’

Lebanese Prime Minister Saad Al-HarirI heads a meeting to discuss a draft policy statement at the governmental palace in Beirut. (Reuters)
Updated 07 February 2019
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New Lebanon government calls for ‘painful economic reforms’

  • State jobs hiring freeze as Lebanon tightens belt
  • Statement sets the main policy objectives of Prime Minister Saad Al-Hariri's government

BEIRUT:  Lebanon is to freeze hiring for state jobs as it embarks on a program of economic reform described as “difficult and painful.”

The halt to new government employment “in all its forms” will last throughout 2019, followed by four years of replacing only half the number of people who retire, and on condition that strict new deficit reduction targets are met.

A draft government policy statement, parts of which were leaked on Wednesday, sets the main policy objectives of Prime Minister Saad Hariri’s national unity government, which was formed last week after nine months of wrangling over ministerial appointments.

The statement commits to bringing down the debt-to-GDP ratio by boosting the size of the economy and reducing the budget deficit. The government is committed to a “financial correction” equal to at least 1 percent of the GDP a year over five years.

This would be achieved by boosting revenues and cutting spending, starting with transfers to the state-run power company, which the World Bank has described as a “staggering burden” on the public finances.

Information Minister Jamal Al-Jarrah said the government was not considering tax increases. There were no major points of contention over the policy statement and it was expected to be approved by the government on Thursday, he said. “The atmosphere was very positive and there was no dispute about any point.”

Hariri’s adviser Nadim Al-Mulla told Arab News: “The government will implement reforms on the restructuring of the electricity and water sector, and tackle corruption.

“Most of the measures aim to reduce the deficit by reducing expenditure. The reduction will affect all ministries without exception and will include administrative expenses.”

The policy statement also said the government would continue the policy of exchange rate stability, as a priority for “social and economic stability.” The Lebanese pound has been pegged to the US dollar for over two decades.

Lebanon has some of the world’s worst debt and balance-of-payments ratios but has avoided financial disaster, confounding critics who have warned for years of debt defaults and a collapse of the pound; all have failed to materialize.

Nevertheless, pessimists were out in force on Wednesday. The Lebanese economy was “an unsustainable story over the medium term,” said Kevin Daly of Aberdeen Standard Investments.

“Having a government in place, that’s important, but they need to address key vulnerabilities and the big one is in the electricity sector — that plus no growth.”


Head of Saudi Arabia’s SRC: ‘Ask banks for a mortgage, and we will refinance it’

Updated 25 April 2019
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Head of Saudi Arabia’s SRC: ‘Ask banks for a mortgage, and we will refinance it’

  • SRC CEO Fabrice Susini: One of our key objectives is to ensure that the banks are extending loans to more and more people
  • Extending home-ownership is one of the cornerstones of the Vision 2030 strategy to diversify the economy away from oil production

RIYADH: The head of the state-owned Saudi Real Estate Refinance Company (SRC) has made an unprecedented offer to the Kingdom’s home-seekers to underwrite future mortgages.
Speaking at the Financial Sector Conference in Riyadh, Fabrice Susini, SRC CEO, told the audience: “Ask them (the banks) for a mortgage, and we will refinance it.”
Although Susini later clarified his remarks to show that he still expected normal standards of mortgage applications to be met, the on-stage show of bravado illustrates SRC’s commitment to facilitate home-ownership in the Kingdom.
“Obviously if you have no revenue, no income, poor credit history, that will not apply. Now if you have a job, it is different. We have people in senior positions at big foreign banks that could not get a mortgage,” he explained.
He said that Saudi banks have traditionally assessed mortgages on the basis of “flow stability” of earnings. Government employees, or those of big corporations like Saudi Aramco and SABIC, found it easy to get mortgages “because you were there for life.”
“One of our key objectives is to ensure that the banks are extending loans to more and more people. The government is pushing for entrepreneurship, private development, private jobs. If you work in the private sector and cannot get a mortgage the next thing you will do is go to the government for a job,” Susini said.
Extending home-ownership is one of the cornerstones of the Vision 2030 strategy to diversify the economy away from oil production. Saudi Arabia has one of the lowest rates of mortgage penetration of any G20 country — in single digit percentages, compared with others at up to 50 percent.