UPDATED - $1 billion
subsidized by Central Bank

New modified package

will be launched this week

The Central Bank (BDL) will launch this week a new stimulus package for 2018. Interest rates on housing loans and loans provided to the productive sectors will be subsidized, according to Wael Hamdan, Head of BDL’s Financing Unit.

The new package differs from the previous stimulus program. The banks will provide the loans from their own liquidity. BDL will offer the interest subsidies. The aggregate value of loans subsidized is capped at $1 billion. There will be additional modifications to the new package but they are not major changes, Hamdan said. Interest rates will be raised slightly. The Public Corporation for Housing (PCH) will get the lion’s share of this support, according to Hamdan. Banque de l'Habitat (The Housing Bank) will also continue to benefit from this program.

Hamdan said that the productive and technology sectors will continue to profit from the subsidies as well as microcredit borrowers and students.

Banks will be required to abide by limits set by BDL on the amounts they can lend under the stimulus package.

BDL said that the additional $500 million stimulus package granted for 2017 has been used up. It said that demand for subsidized loans has been unprecedented since the last package was approved in October 2017. Strong demand caused delays in the processing of loan applications and approvals.

Rony Lahoud, Chairman of PCH, said they continued to process loan applications at the usual pace since it takes up to four months for the application files to reach the banks.

Only lira-based subsidized loans have been granted in the last two months. Most of the loans that the banks are providing are dollar denominated. The reason for the shift in lending currencies was a scarcity in liquidity in lira.

BDL had originally earmarked a package of $1 billion for 2017 under the previous stimulus program. It was completely disbursed. BDL issued an additional $500 million.

The sums allocated by BDL under that program totaled $5.9 billion. The program was launched in 2013 when many banks had maxed out on exemptions from their reserve requirements that BDL allowed to subsidize end-user loans. The Central Bank said last year that, starting in October 2017, banks can no longer benefit from these exemptions.

The story has been updated to clarify the Central Bank will subsidize rates, but will not supply liquidity, which the banks should provide.