by Donna Abu-Nasr  Lebanon’s economy remains resilient despite the political instability
that has prevented the election of a president for more than two years,
according to central bank Governor Riad Salameh.

“We’re doing
fine,” Salameh said in a telephone interview on Thursday, adding that
measures taken this year to boost liquidity have put the economy in
position to withstand challenges that include regional conflict and a
barely functioning government. Foreign reserves are at a record high
over $40 billion, the currency is stable and liquidity is adequate, he
said. Growth will range between 1.5 to 2 percent this year, maintaining
the 2015 pace.

Beset by sectarian crises and regional proxy conflicts, Lebanon has been
without a head of state since President Michel Suleiman’s term expired
in May 2014, as lawmakers haggle over a successor. Meanwhile, more than a
million refugees have poured into the nation — with a population of
4.5 million — to escape the Syrian conflict, which has blocked
Lebanon’s only overland trade route and kept Gulf Arab.

Lebanon is also the Arab world’s most indebted nation. Policy tools
adopted this year, including an exchange of government bonds in U.S.
dollars and Treasury bills in Lebanese pounds between the Finance
Ministry and the central bank, have boosted liquidity, Salameh said. The
measure created $3 billion of extra foreign reserves in the central
bank’s account, the former Merrill Lynch banker said in a speech in May.

“After
the engineering that was successful, the liquidity is adequate and
there are funds to be directed to the private sector,” Salameh said in
the interview. “What is still missing is political stability.”

Salameh
also said Lebanon has the right liquidity-boosting measures in place to
withstand a potential drop in inflows from Saudi Arabia, which is weighing plans to
cancel more than $20 billion worth of projects as it grapples with a
plunge in oil revenue. Tens of thousands of Lebanese live and work in
the kingdom.

“Liquidity is less in the region, and we have developed the proper strategies to keep liquidity adequate in Lebanon,” he said.

S&P
Global Ratings this month revised its outlook on Lebanon to stable from
negative, on the basis that bank deposits in Lebanon will increase
enough to support government borrowing requirements. Even so, growth
will remain “relatively weak as long as the domestic political
standstill persists and the Syrian civil war continues,” the company
said in a report.

“We see little prospects for significant improvement in macroeconomic fundamentals,” S&P said.