Balance of payments
deficit doubles

Slowdown in cash inflow overtakes that of outflow

The deficit of the balance of payments doubled last year to $3.35 billion at the end of 2015 according to the Central Bank (BDL).

Roger Melki, Advisor to the Executive Board of Bemo Bank, attributed the widening of the deficit to the incremental effect of many factors, all leading to a waning in investor appetite.

The banking sector’s capacity to attract capital has deteriorated due to higher systemic risk and domestic business opportunities have become fewer owing to the war of attrition in Syria and the local political stalemate, he said.

Remittances have remained stable, increasing by a mere 0.7 percent to $7.5 billion in 2015, according to the World Bank. Foreign Direct Investment (FDI) numbers are not yet available but are believed to have declined sharply.
Opportunities in GCC countries are dwindling amid declining oil revenues.

Melki also cited other factors that have contributed to the escalation of the deficit that included, among others, US pressures on the local banking sector, the economic slowdown, the increase in global interest rates, and the fact that credit rating agencies have reduced the Sovereign rating.

If the future deficits in the balance of payments continue to widen, the country may risk a steady shrinking of its foreign reserves and this makes external borrowing costly for Lebanon, he said. But this cannot happen unless large deficits are recorded over many years, Melki said.