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Capital Markets

Lebanese bank mergers look set for revival

Riad Salameh has been governor of Lebanon's central bank, Banque du Liban, since 1993. He talks to Kate Luxford about bank consolidation and the need for capital market growth

Lebanon has now become almost famous for the level of its sovereign debt, with a debt-to-GDP ratio of about 180%. Is Lebanon's debt the country's greatest economic challenge?

Salameh: job creation is key

I believe the biggest challenge, in order to maintain stability in prices, in general, is the creation of jobs. The curbing of unemployment, especially among the educated, is a major challenge for the years to come. Lebanon's debt is sustainable, because out of the $36 billion of debt, only $21 billion is in the market. The remaining $15 billion is held by the central bank, the countries that lent to Lebanon in Paris II [money lent by official creditors in 2002 in return for reforms], and public entities. So the second challenge is to curb the deficit that is created every year. I believe success in this operation will help in enhancing better economic growth, because it will decrease the risks of the country, and therefore decrease interest rates, which would be beneficial for investment. The issue is then to have a control on the public debt.

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