The banks’ pulling of credit
could lead to food shortages

Foreign exchange counters

cannot cope with demand for liquidity

A number of banks are tightening the credit facilities available to importers, heightening the risks of shortages of imported goods, according to Lebanese Businessmen Association (RDCL).

Some banks have stopped providing new credit facilities to businesses altogether. After a 14-day shutdown caused by the anti-government protests and without prior notice, these banks also lowered the ceilings of existing credit facilities to the level of available balances, the RDCL said.

The banks in question are also refusing to carry out conversion operations from the lira to other currencies for their customers. The RDCL said that it has become almost impossible for business people to transfer money to their foreign suppliers. Sometimes, the banks are even refusing to carry out local transfers. According to the RDCL, these measures could paralyze business operations and lead to shortages of raw materials and basic commodities. RDCL said that business people could lose their credibility with their customers and suppliers.

Hani Bohsali, Chairman of the Syndicate of Importers of Foodstuffs, Consumer Products and Drinks, said that the banks have told importers that these measures are temporary until further notice. He said that the situation is still unclear and that the main reason for the credit tightening is the deterioration of the political conditions. Bohsali said that the official dollar exchange value should be maintained because most consumer products are imported, and manufacturers import a high proportion of the inputs used in production.

Adel Abi Chaker, Chairman of ManyFood, which imports foodstuffs, said that if the current credit crunch is maintained, some goods will no longer appear in the market in three months’ time. “Stocks are being depleted. Importers cannot place new orders due to the lack of dollar liquidity,” he said. The liquidity available at the foreign exchange counters is very small and cannot meet the needs of importers, according to Abi Chaker. Large traders have additional problems with banks because they are asking for large amounts, he said. Abi Chaker said they are trying to shorten the maturity of credit extended to their customers in order to mitigate the problem.

Arslan Sinno, Chairman of the Syndicate of Agri-food Traders, said that the shortage in dollars is leading to a decrease in the import of basic commodities such as corn, rice, and lentils. He said that the problem is likely to worsen in the coming weeks as the market is still consuming existing stocks. Prices are amended according to the changes in dollar prices and more traders are resorting to cash transactions, Sinno said.