Lebanese Prime Minister Saad Hariri made an impassioned appeal for UAE investment on Monday, as the country seeks ways to boost its economy. Beirut is buckling under the mounting pressure on its currency and ever-growing debt servicing obligations.
At the second UAE-Lebanon Investment Forum in Abu Dhabi, sponsored by the UAE Ministry of Economy and the Abu Dhabi Chamber of Commerce, Mr Hariri urged investors to pour resources into the Lebanese economy, which he said is intent on reform.
"We will do all the planned reforms to change the way we do business and become almost like the UAE," Mr Hariri told delegates. "The UAE has long stood with Lebanon in good and bad days" he added. He asked investors to look at his country as a springboard for the reconstruction of Syria and Iraq.
“With conflicts all around, Lebanon is situated in a difficult location but at the same time there is an opportunity.”
Lebanon has $86 billion (Dh316bn) of public debt as of the end of July, one of the world’s highest debt-to-GDP ratios, and faces maturing debt of $1.5bn in November.
However, Lebanon's Central Bank governor Riad Salameh told the conference that authorities have enough resources under their disposal to keep supplying dollars to banks, dismissing the emergence of a black market in the country's currency in recent weeks as the country seeks billions of dollars to refinance maturing debt.
“We cannot say there is a parallel currency market unless banks start using a different exchange rate than the central bank,” Mr Salameh said, referring to the official exchange rate of 1,507.5 Lebanese pounds to the dollar.
He acknowledged that Lebanon is undergoing “difficulties” but said the authorities have taken “the necessary precautions” to keep the system liquid.
Mr Salameh said gross foreign exchange reserves at the central bank, excluding gold, currently stand at $38.5 billion, up an unspecified amount from their level in June.
The conference held various workshops and bilateral meetings between UAE and Lebanese companies, which discussed partnerships between the public and private sectors in both countries. The companies looked into renewable energy as well as oil and gas, an area Lebanon is keen to develop offshore in its Mediterranean waters.
"We believe that Lebanon, with its expertise and potential, is able to move forward and lead in various areas of development. We are keen to be partners in our countries' march towards progress and prosperity," UAE Minister of Economy Sultan Al Mansouri said at the conference.
Lebanon faces its deepest economic crisis since the end of a 15-year civil war in 1990. The mounting pressure on the Lebanese pound, which is pegged to the US dollar, has resulted in individual Lebanese banks placing curbs on greenback withdrawals. Mr Hariri has vowed to maintain the long-standing pound-dollar peg.
This month Moody's Investors Service put Lebanon's credit rating under review for a possible downgrade. Moody's said the review was taken due to the recent significant tightening in external financing conditions and the reversal in the bank deposit inflows that are essential in enabling Lebanon to meet the government's financing needs".
Private sector deposits at the banks in Lebanon declined by $2.2bn, or 1.3 per cent, in the first seven months of this year.
The announcement by the rating agency followed weeks of protests in the country by citizens demanding banks to remove curbs limiting foreign currency withdrawals.
Mr Hariri, 49, is seeking to remain a political force who Arab and Western capitals can count on to curb the expansion of Hezbollah and Iran in the region.
His connections were crucial to $11bn of pledges made at an international donor conference held in Paris last year. Those funds, however, are contingent on Lebanon implementing structural reforms and cutting its fiscal deficit.
From 2017 to 2018, UAE imports from Lebanon grew 21 per cent, while re-exports from the UAE to Lebanon increased more than 55 per cent, Mr Al Mansouri said. Non-oil trade between the two countries reached $2.6bn, up 34 per cent on 2017.
"We have a wide horizon of opportunities and sectors through which we can strengthen our mutual investment activities," Mr Al Mansouri said. Infrastructure and gas exploration are among the sectors where the UAE would be exploring opportunities, he added. "We would like to see Lebanon as an emerging economic power in the region".
