Lebanon's Closed Banks Pledge to Pay Out Salaries

A demonstrator burns tires blocking a road in the port city of Sidon, Lebanon, October 28, 2019. REUTERS/Ali Hashisho
A demonstrator burns tires blocking a road in the port city of Sidon, Lebanon, October 28, 2019. REUTERS/Ali Hashisho
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Lebanon's Closed Banks Pledge to Pay Out Salaries

A demonstrator burns tires blocking a road in the port city of Sidon, Lebanon, October 28, 2019. REUTERS/Ali Hashisho
A demonstrator burns tires blocking a road in the port city of Sidon, Lebanon, October 28, 2019. REUTERS/Ali Hashisho

Lebanese banks said on Monday they would ensure public sector workers were paid their salaries as they remain closed by a wave of protests against politicians blamed for corruption and steering Lebanon toward economic collapse.

Protesters set up new roadblocks early on Monday to keep pressure up, defying security forces who tried to re-open roadways but with orders not to use force.

As the day wore on the protests, now in their 12th day, appeared to be smaller than in recent days.

The crisis has paralyzed Lebanon, closing banks, schools and some businesses. The government has yet to indicate it would cede ground to protesters, whose demands include its resignation.

On Monday President Michel Aoun said on he was “following developments”, and Prime Minister Saad al-Hariri is due to hold a cabinet meeting to discuss one of the measures in an emergency reform package proposed last week.

Lebanon’s banking association said banks would remain shut on Tuesday for a 10th working day, but said the central bank had provided the liquidity necessary to pay out salaries for public sector workers, including security forces.

Banks have previously said they will ensure people receive their end-of-month salaries through ATMs. The banks have said they are staying closed out of concern for the safety of customers and employees.

Bankers and analysts have also cited wide fears depositors will try to take out their savings when banks reopen.

Gabriel Sterne, head of global macro research at Oxford Economics, said Lebanon is facing a “bank jog”, rather than a full-blown bank run. He added that capital controls were needed in the short-term, but can also scare away investors.

The International Monetary Fund (IMF) said it was evaluating an emergency reform package the Lebanese government announced last week, but which has failed to defuse the popular anger or reassure foreign donors.

Capital inflows needed to finance the state deficit and pay for imports have been slowing down, generating financial pressures not seen in decades, including the emergence of a parallel market for dollars.

While Lebanon’s pound currency is officially pegged at 1507.5 to the dollar, parallel market rates have risen in recent months.

One market source quoted a price of 1,700 pounds to the dollar, while a second quoted 1,740, a roughly 15% premium on the official rate.

As economic strains have grown in recent years, Lebanon’s central bank and banks have taken measures to encourage people to keep money in local currency, in longer term deposits and inside the country.

While Lebanon has not imposed hard capital controls, a state prosecutor banned traders and money exchangers from taking significant amounts of physical dollar currency out the country at air and land borders, without specifying amounts.

REFORM PACKAGE
Protesters gathered early on Monday to cut major arteries across Lebanon, using cars, tents and dumpsters.

“We know we are facing lying, corrupt ruling authorities. It’s been 30 years of promises and promises. Why would I believe them now?” said Rawad Taha, 21, a university student manning a roadblock in Beirut.

“I won’t leave the street until the government resigns or there’s a tangible change I can feel.”

On one major road in Beirut, protesters set up a make-shift living room with sofas, armchairs and a fridge for the sit-in.

The leaderless rallies have drawn people from around Lebanon furious at sectarian political leaders they see as plundering state resources for personal gain.

Lebanon is saddled with one of the world’s highest levels of government debt as a share of economic output. The IMF has forecast a fiscal deficit of 9.8% of GDP this year and 11.5% next year.

Prime Minister Hariri’s coalition government, which includes nearly all of Lebanon’s main parties, tried to appease the protesters with a set of reforms including anti-corruption laws and long-delayed measures aimed at fixing state finances.

The plans includes accelerating long-delayed steps to fix the state-run power sector, which drains $2 billion from the treasury per year while failing to meet power needs for the Lebanese.

“We need to see not only what is in the package but also the timeline of the package for a country like Lebanon that has such high level of debt over GDP and high levels of twin deficits,” Jihad Azour, director of the IMF’s Middle East and Central Asia Department told Reuters.

“Fundamental reforms are urgently needed in Lebanon in order to restore macro-economic stability, bring confidence back, stimulate growth and provide some solutions to the issues that were raised by the street,” Azour said.



Leading Harvard Trade Economist Says Saudi Arabia Holds Key to Success in Fragmented Global Economy

Professor Pol Antràs speaks during a panel discussion at the AlUla Conference for Emerging Market Economies (Asharq Al-Awsat).
Professor Pol Antràs speaks during a panel discussion at the AlUla Conference for Emerging Market Economies (Asharq Al-Awsat).
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Leading Harvard Trade Economist Says Saudi Arabia Holds Key to Success in Fragmented Global Economy

Professor Pol Antràs speaks during a panel discussion at the AlUla Conference for Emerging Market Economies (Asharq Al-Awsat).
Professor Pol Antràs speaks during a panel discussion at the AlUla Conference for Emerging Market Economies (Asharq Al-Awsat).

Harvard University economics professor Pol Antràs said Saudi Arabia represents an exceptional model in the shifting global trade landscape, differing fundamentally from traditional emerging-market frameworks. He also stressed that globalization has not ended but has instead re-formed into what he describes as fragmented integration.

Speaking to Asharq Al-Awsat on the sidelines of the AlUla Conference for Emerging Market Economies, Antràs said Saudi Arabia’s Vision-driven structural reforms position the Kingdom to benefit from the ongoing phase of fragmented integration, adding that the country’s strategic focus on logistics transformation and artificial intelligence constitutes a key engine for sustainable growth that extends beyond the volatility of global crises.

Antràs, the Robert G. Ory Professor of Economics at Harvard University, is one of the leading contemporary theorists of international trade. His research, which reshaped understanding of global value chains, focuses on how firms organize cross-border production and how regulation and technological change influence global trade flows and corporate decision-making.

He said conventional classifications of economies often obscure important structural differences, noting that the term emerging markets groups together countries with widely divergent industrial bases. Economies that depend heavily on manufacturing exports rely critically on market access and trade integration and therefore face stronger competitive pressures from Chinese exports that are increasingly shifting toward alternative markets.

Saudi Arabia, by contrast, exports extensively while facing limited direct competition from China in its primary export commodity, a situation that creates a strategic opportunity. The current environment allows the Kingdom to obtain imports from China at lower cost and access a broader range of goods that previously flowed largely toward the United States market.

Addressing how emerging economies should respond to dumping pressures and rising competition, Antràs said countries should minimize protectionist tendencies and instead position themselves as committed participants in the multilateral trading system, allowing foreign producers to access domestic markets while encouraging domestic firms to expand internationally.

He noted that although Chinese dumping presents concerns for countries with manufacturing sectors that compete directly with Chinese production, the risk is lower for Saudi Arabia because it does not maintain a large manufacturing base that overlaps directly with Chinese exports. Lower-cost imports could benefit Saudi consumers, while targeted policy tools such as credit programs, subsidies, and support for firms seeking to redesign and upgrade business models represent more effective responses than broad protectionist measures.

Globalization has not ended

Antràs said globalization continues but through more complex structures, with trade agreements increasingly negotiated through diverse arrangements rather than relying primarily on multilateral negotiations. Trade deals will continue to be concluded, but they are likely to become more complex, with uncertainty remaining a defining feature of the global trading environment.

Interest rates and artificial intelligence

According to Antràs, high global interest rates, combined with the additional risk premiums faced by emerging markets, are constraining investment, particularly in sectors that require export financing, capital expenditure, and continuous quality upgrading.

However, he noted that elevated interest rates partly reflect expectations of stronger long-term growth driven by artificial intelligence and broader technological transformation.

He also said if those growth expectations materialize, productivity gains could enable small and medium-sized enterprises to forecast demand more accurately and identify previously untapped markets, partially offsetting the negative effects of higher borrowing costs.

Employment concerns and the role of government

The Harvard professor warned that labor markets face a dual challenge stemming from intensified Chinese export competition and accelerating job automation driven by artificial intelligence, developments that could lead to significant disruptions, particularly among younger workers. He said governments must adopt proactive strategies requiring substantial fiscal resources to mitigate near-term labor-market shocks.

According to Antràs, productivity growth remains the central condition for success: if new technologies deliver the anticipated productivity gains, governments will gain the fiscal space needed to compensate affected groups and retrain the workforce, achieving a balance between addressing short-term disruptions and investing in long-term strategic gains.


Aljadaan: Emerging Markets Account for 70% of Global Growth

Al-Jadaan speaking to the attendees at the "AlUla Conference for Emerging Market Economies" (Asharq Al-Awsat
Al-Jadaan speaking to the attendees at the "AlUla Conference for Emerging Market Economies" (Asharq Al-Awsat
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Aljadaan: Emerging Markets Account for 70% of Global Growth

Al-Jadaan speaking to the attendees at the "AlUla Conference for Emerging Market Economies" (Asharq Al-Awsat
Al-Jadaan speaking to the attendees at the "AlUla Conference for Emerging Market Economies" (Asharq Al-Awsat

Saudi Minister of Finance Mohammed Aljadaan stressed Sunday that the world economy is going through a “profound transition,” saying emerging markets and developing economies now account for nearly 60 percent of the global Gross Domestic Product (GDP) in purchasing power terms and over 70 percent of global growth.

In his opening remarks at the AlUla Conference for Emerging Market Economies, organized by the Saudi Ministry of Finance and the IMF in AlUla, the minister said these economies have become an increasingly important driver of global growth with their share of global economy more than doubling since 2010.

“Today, the 10 emerging economies in the G20 alone account for more than half of the world growth. Yet, they face a more complex and fragmented environment, elevated debt levels, slower trade growth and increasing exposure to geopolitical shocks.”

“Unfortunately, more than half of low income countries are either in or at the risk of debt distress. At the same time global trade growth has slowed at around half of what it was pre the pandemic,” Aljadaan added.

The Finance Minister stressed that the Saudi experience over the past decade has reinforced three lessons that may be relevant to the discussions at the two-day conference, which brings together a select group of ministers and central bank governors, leaders of international organizations, leading investors and academics.

“First, macroeconomic stability is not the enemy of growth. It is actually the foundation,” he said.

“Structural reforms deliver results only when institutions deliver. So there is no point of reforming ... if the institutions are unable to deliver,” he stated.

Finally, he said that “international cooperation matters more, not less, in a fragmented world.”


Georgieva from AlUla: Growth Still Lacks Pre-pandemic Levels

Kristalina Georgieva speaking to attendees at the second edition of the AlUla Conference for Emerging Market Economies (Asharq Al-Awsat)
Kristalina Georgieva speaking to attendees at the second edition of the AlUla Conference for Emerging Market Economies (Asharq Al-Awsat)
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Georgieva from AlUla: Growth Still Lacks Pre-pandemic Levels

Kristalina Georgieva speaking to attendees at the second edition of the AlUla Conference for Emerging Market Economies (Asharq Al-Awsat)
Kristalina Georgieva speaking to attendees at the second edition of the AlUla Conference for Emerging Market Economies (Asharq Al-Awsat)

International Monetary Fund (IMF) Managing Director Kristalina Georgieva said Sunday that world growth still lacks pre-pandemic levels, expressing concern as she expected more shocks amid high spending and rising debt levels in many countries.

Georgieva spoke at the AlUla Conference for Emerging Market Economies, organized by the Saudi Ministry of Finance and the IMF in AlUla.

The two-day conference brings together a select group of ministers and central bank governors, leaders of international organizations, leading investors and academics to deliberate on policies to global stability, prosperity, and multilateral collaboration.

Georgieva said that the conference was launched last year in recognition of the growing role of emerging market economies in a world of sweeping transformations.

“I came out of this gathering .... With a sense of hope for the pragmatic attitude and determination to pursue good policies and build strong institutions,” she said.

Georgieva stressed that “good policies pay off,” and said that growth rates across emerging economies reached four percent this year, exceeding by a large margin those of advanced economies that are around 1.5 percent.