While the rest of the world sinks into economic meltdown, there is much joy to be taken from the news that Lebanon is not only fighting back, but winning the battle against credit crunchdom.
According to Lebanon’s Central bank, treasury vaults are full, cash has been flowing in unparalleled quantities, and the banks are posting record deposits.
Ultimately, while the rest of the world sinks its weary head into its hands with an almighty groan, bankers are lauding 2008 as Lebanon’s best year in the country’s financial history.
For Riad Salameh, the aforementioned governor of Central Bank, the boom can be attributed to that most basic of actions: preparation: “I saw the crisis coming and I told the commercial banks in 2007 to get out of all international investments related to the international markets.” [Source]
In turn, banks weren’t allowed to take on too much debt and had to have at least 30% of their assets in cash.
Moreover, they were not allowed to speculate in risky packages of bundled up debts, while weak banks were forced to merge with bigger ones before they got into trouble.
Such financial savvy has drawn admiration from financial quarters, including the International Monetary Fund, which commended the measures:
You could have thought they had a crystal ball. It was very wise of the Lebanese regulators not to get involved in all these risky international investments that turned out to be the doom of many banking systems. [Source]
Yet it is not just the bankers who are rightly rubbing their hands with glee, for Lebanon’s tourism industry has announced a four-year high, with the first 10 months of 2008 recording the highest number of visitors since the assassination of ex-premier, Rafiq Hariri.
In a report released on Wednesday, the number of tourists is estimated to have reached 1.10 million at the end of October, giving an increase of 28.9%, compared to the same period of 2007 when the figure stood at 855,573.
Given Lebanon’s turbulent history, it is a triple joy to hear of its success, although for Salameh, it is that very history that ushered the economic sector towards caution:
The system we created has been tested against wars, against instability, against political assassinations. And our sector would be much more developed if Lebanon did not have political and security risks, but it has also induced us to have a conservative reflex because we were always getting ready for the worst case scenario. [Source]
For decades, Lebanon’s presence in international headlines has been overshadowed by tragedy.
From this week however, it should be held aloft as a paradigm of economic wisdom.
As exit-bound President Bush cringed his way through a formal declaration of recession in the United States, and PM Gordon Brown flaps his mouth in disbelief at the chaos, perhaps Lebanon could pass on a copy of their strategy?
This way, Mr. Brown – and his successors – could learn, and prevent, future decades of monetary woes.
[Image via: Ashraf Khundugji]