The Central Bank (BDL) has launched a new stimulus program to subsidize housing loans and loans to the productive sectors.
BDL said in a new circular that it will subsidize up to $1 billion of loans this year. The loans denominated in lira that will be eligible for the subsidies total LL810 billion ($540 million) with the remaining $460 million consisting of loans denominated in US dollars. The dollar loans are mainly provided to the productive sectors.
The lion's share of the stimulus package consists of housing loans. Housing loans in lira represent 93 percent of the overall eligible loans in the national currency. They account for half of the overall package. The banks also provide subsidized housing loans in dollars to Lebanese expatriates.
Interest rates on subsidized loans, according to the new circular, are tied to the average indicative rate on funds deposited with BDL. The subsidy rate will be amended each year if the average indicative rate changes. In the previous stimulus program, subsidized rates were based on interest rates on treasury bills.
Interest rates on the loans provided by the Public Corporation for Housing (PCH) will not change this year and will remain at 3.75 percent, said Rony Lahoud, Chairman of PCH. He said that PCH holds the largest share in the housing loan market thanks to its competitive interest rates and the additional benefits it provides to borrowers.
The interest rate hikes on other subsidized loans ranged from 50 to 100 basis points, according to Lahoud.
The new stimulus program differs from the previous one as the banks will provide the loans from their own liquidity. BDL allocated a total of $5.9 billion under the previous program which was launched in 2013 when many banks could no longer benefit from exemptions on their reserve requirements. BDL allowed the banks to use these exemptions to provide subsidized loans.