‘Rescue, reform and rebuild’: Can Lebanon’s new government save the economy?

‘Rescue, reform and rebuild’: Can Lebanon’s new government save the economy?
Lebanon new goverment must implement decisive reforms to regain international trust and reintegrate into the global financial system. (Supplied)
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Updated 03 March 2025
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‘Rescue, reform and rebuild’: Can Lebanon’s new government save the economy?

‘Rescue, reform and rebuild’: Can Lebanon’s new government save the economy?
  • Lebanon needs sustainable economic growth strategy focused on key sectors like technology, services, and exports

RIYADH: With a new president and a fresh cabinet, Lebanon stands at a pivotal moment. Can this government reverse economic collapse and restore trust?

The financial crisis, ongoing since 2019, has caused an $80 billion banking sector deficit, while debt restructuring remains stalled by political disputes.

The national currency has seen a 90 percent drop in value since 2019, and an International Monetary Fund delegation in May found Lebanon’s economic reforms insufficient to warrant financial aid, leading to an overreliance on foreign reserves. 

Nawaf Salam, appointed prime minister in January, used his first speech after securing the role to pledge to “rescue, reform and rebuild” Lebanon, alongside the leadership of President Joseph Aoun.

Both are facing mounting pressure to enact deep structural reforms, Fadi Nicholas Nassar, senior fellow at the Middle East Institute and director of the Institute for Social Justice and Conflict Resolution at the Lebanese American University told Arab News: “The country is emerging from financial collapse, the lingering trauma of the Beirut port blast, and over a year of war, yet time is not on its side. Trust, though quickly lost, is not so easily restored.” 

Jassem Ajaka, a Lebanese economist and professor, argues that full transparency and an independent audit of Lebanon’s financial sector and public finances are fundamental first steps. “We have not had such an audit since 2003, which is unacceptable. Without this, it is impossible to fairly distribute losses,” he told Arab News.

“Lebanon’s ability to secure economic aid and investments is deeply tied to the shifting geopolitical landscape,” said Ralph Baydoun, founder and director of research and strategic communications firm InflueAnswers. 

Baydoun explained that Lebanon must implement decisive reforms to regain international trust and reintegrate into the global financial system. 

Key priorities include robust anti-money laundering measures to escape the Financial Action Task Force blacklist grey list, an independent audit of the Banque du Liban and commercial banks for transparency, and a clear framework for distributing financial losses. 

He further added that the country needs a sustainable economic growth strategy focused on key sectors like technology, services, and exports.

One early positive sign came when Salam vowed to end sectarian quotas in financial appointments, a longstanding governance issue.

The financial burden on depositors

Lebanese banks had placed the majority of their funds with the central bank, whose financial engineering schemes propped up government spending and an unsustainable currency peg. Disagreements over how to distribute financial losses have fueled political deadlock.

Ajaka suggested deep restructuring of the banking sector, including mergers based on economic benefits and asset sales where necessary. “This restructuring should prioritize both depositors’ interests and the Lebanese economy. However, we must first determine the financial status of each bank before deciding the best course of action,” he said.

Depositors continue to bear losses while those responsible remain unpunished, Farida said. In 2023, the adviser proposed an alternative recovery roadmap outlining a phased approach to restoring depositors’ savings while holding financial elites accountable for the economic collapse. 

The plan prioritizes an immediate payout to small depositors, funded by a comprehensive audit of bank reserves and the recovery of excessive interest payments and illicitly transferred funds. Larger deposits would be gradually restored through a combination of bank bail-ins and legal actions against those responsible for mismanaging Lebanon’s banking sector. 

Lebanon’s ability to secure economic aid and investments is deeply tied to the shifting geopolitical landscape.

Ralph Baydoun, founder and director of InflueAnswers

Commenting on the reduction in the potential payouts for depositors, Farida said: “The more time we wait, the less this number is. I expect this number to be going down with time. Unless there is a complete audit, we can’t really tell the exact number.”

Unlike past government proposals, Farida’s plan rejects the use of public assets to cover banking losses, aiming instead to shield state resources from further depletion. However, with deposit values eroding daily, he warns that delays in implementation will make full recovery increasingly difficult.

The Depositors’ Union welcomed reform pledges but stressed accountability, rejecting any plan shifting banking losses to public assets. It called for fair restructuring that prioritizes depositors’ rights and holds banks accountable.

“Accountability is the key for any reform plan. There cannot be a regain of the trust in the system, in the public sector or in banking sector, if the ones who were responsible for this crisis were not held accountable,” Mohammad Farida, the economic adviser to the Depositors’ Union in Lebanon, told Arab News.

One of the greatest obstacles to reform was Hezbollah’s influence over the state. The group’s political and military entrenchment continued for years to deter international investment and prevented Lebanon from fully reintegrating into the regional economy. 

The damage cannot be undone by words alone. Only material deliverables can restore trust — locally, regionally, and globally.

Fadi Nicholas Nassar, senior fellow at the Middle East Institute

For Lebanon to emerge from its crisis, Nassar argued, major structural changes are needed. “Restoring full sovereignty means dismantling Hezbollah, not just managing around it. Governance must shift from patronage to competence, with ministries staffed by professionals, not cronies. Basic services like electricity cannot remain luxuries,” he said.

Baydoun argued that Hezbollah is now in a more precarious position than in previous years due to financial strains from war and a decline in Iranian support. 

He explained to Arab News that Lebanon’s ties with Iran and Hezbollah have long restricted Western and Gulf financial support. 

Baydoun highlighted that the diminishing influence of Iran’s regional network and the weakening of the Assad regime in Syria have created an opportunity for Lebanon to move closer to Western spheres of influence and regain donor confidence.

The economic crisis deepened as the humanitarian situation worsened. The World Bank estimated Hezbollah-Israel war damages at $8.5 billion, with the economy shrinking 10 percent in 2024 — its fifth year of contraction, totaling over 34 percent of the gross domestic product. Over 875,000 were displaced, and key sectors faced billions in losses.

“The estimated $10 billion required for reconstruction in Lebanon will likely come from international donors, primarily the GCC (Gulf Cooperation Council), rather than from Iran,” Baydoun added.

On Jan. 29, President Aoun reaffirmed Lebanon’s commitment to reforms, stating that the new government’s priority is drafting necessary legislation. In a meeting with World Bank official Osman Dion, Aoun said: “The first task of the new government is to immediately begin drafting the necessary legislation for this purpose.” 

Accountability is the key for any reform plan. There cannot be a regain of the trust in the system, in the public sector or in banking sector, if the ones who were responsible for this crisis were not held accountable.

Mohammad Farida, economic adviser to the Depositors’ Union in Lebanon

Nassar said that Lebanon’s new government has only one way to prove its legitimacy – by delivering results. 

“The damage cannot be undone by words alone. Only material deliverables can restore trust — locally, regionally, and globally,” he said.

Moody’s has projected that economic activity could begin to recover later this year, contingent on political stability and the implementation of reforms. Yet, Lebanon’s road to recovery is far from guaranteed. International donors — including the Gulf ones — remain skeptical, demanding real action rather than political rhetoric.

“Attracting foreign direct investments requires two key conditions: Lebanon must implement ceasefire agreements with Israel and establish an independent judiciary to combat corruption,” Ajaka stated. He added that Lebanon’s high return on investment potential could make it a key regional player if these conditions are met.

Saudi Arabia’s Foreign Minister Faisal bin Farhan underscored this sentiment during a visit to the country on Jan. 23, saying: “We will need to see real action, real reform, and a commitment to a Lebanon that is looking to the future, not to the past.”

Baydoun explained that Lebanon’s exclusion from key regional trade routes, including China’s Belt and Road Initiative and the Iraq-Syria-Turkiye-Europe corridor, stems from both political instability and shifting regional alliances. 

To avoid further marginalization, he noted, Lebanon must actively lobby for integration and position itself as a strategic trade hub. The Beirut Port explosion accelerated its economic sidelining, making its reconstruction — aligned with regional trade networks— a priority. “If Lebanon does not proactively position itself as an indispensable part of one of these networks, it risks permanent exclusion from the evolving global supply chain,” Baydoun added.

The energy sector and economic recovery

Addressing the financial crisis, energy policy expert and Middle East and North Africa director of the Natural Resource Governance Institute, Laury Haytayan, said: “There is a need to encourage the private sector to invest in the renewable energy sector to go beyond the individual initiatives.”

Lebanon’s offshore gas has often been seen as an economic game-changer, but Haytayan warned against unrealistic expectations, saying that the nation lacks active hydrocarbon discoveries, making energy wealth an unreliable recovery catalyst.

The energy expert dismissed the notion of using the country’s underdeveloped oil and gas sector as a bargaining chip in negotiations with international stakeholders, while stressing the need to restructure Lebanon’s electricity sector rather than relying on oil and gas for short-term recovery. 

Haytayan urged regulatory reforms, including appointing the long-awaited electricity regulator and enforcing the 23-year-old electricity law mandating Electricite Du Liban’s unbundling and private sector involvement. She questioned whether the new minister would push for privatization, a move which Ajaka argued is crucial for state-owned enterprises, particularly in the electricity sector. 

“Lebanon has spent over $50 billion on electricity with no results. Justice must investigate these expenditures,” he said, citing the UK’s deregulation success as a potential model for Lebanon.

Looking at regional energy developments, Haytayan was clear that Lebanon cannot be measured against leading Gulf states, saying: “There is no country in the Middle East and North Africa that could be compared to Saudi Arabia and the UAE when it comes to technical and financial capacities.”

Baydoun argued that the Gulf’s dominance in energy does not hinder Lebanon’s potential but rather offers a strategic advantage. While the GCC exports to Asia, Lebanon — if it begins oil and gas production — could target European markets, avoiding direct competition. He added that Lebanon should leverage the GCC for technical expertise and investment.

The economic adviser to the Depositors’ Union adviser Farida said the primary challenge in implementing reforms and resolving Lebanon’s economic crisis lies in the need for legislative updates, including new laws requiring parliamentary approval, stressing that any plan must first gain parliamentary backing to have a real chance of success.

He said: “It’s still premature to judge whether this administration will be able to actually produce a new comprehensive plan for the financial gap in the banking sector and the overall crisis in the public sector and the administration.”


How early-stage startups build for public markets

How early-stage startups build for public markets
Updated 43 sec ago
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How early-stage startups build for public markets

How early-stage startups build for public markets
  • Critical transitions simultaneously test founders and the business itself

RIYADH: For startups aiming to go public, the path from early-stage to initial public offering is marked by critical transitions that simultaneously test the founders and the business itself. 

While many young companies achieve rapid initial traction, only a select few manage to scale sustainably and navigate the complexities of public markets. 

Investors who specialize in early-stage funding play a crucial role in shaping a startup’s foundation, ensuring that it is built for long-term success rather than short-term growth. 

“The journey from early-stage to IPO isn’t linear. It’s a series of hard transitions that test both the founder and the business,” said Mohammed Al-Meshekah, founder and general partner of Outliers, an early investor in Saudi Arabia’s Tabby, now valued at $3.3 billion and on track for an IPO. 

“The startups that make it aren’t just chasing trends; they’re solving real problems with deep, contrarian insights that others overlook,” he said in an interview with Arab News.

Identifying IPO-ready startups 

Early indicators of a startup’s potential to reach the IPO stage often lie in the strength of its founding team, market opportunity, and ability to scale efficiently. 

Mohammed Al-Zubi, managing partner and founder of Nama Ventures, which backed Saudi unicorns Salla and Tamara — both preparing for IPOs — believes that leadership resilience is one of the most defining factors. 

“The most critical factor is the founding team — their complementary skill sets, resilience, ability to adapt, and long-term vision define the company’s trajectory,” he told Arab News. 

“Markets change, challenges arise, but strong leadership ensures a startup can navigate uncertainty and sustain growth,” he added. 

Beyond leadership, Al-Zubi emphasized the importance of market opportunity and execution. 

“Companies that successfully go public are solving large-scale problems with high demand and room for expansion,” he explained. “A startup must not only show early traction but also demonstrate an ability to scale efficiently.” 

Financial discipline is another critical factor in determining whether a startup can reach the IPO stage. 

The journey from early-stage to IPO isn’t linear. It’s a series of hard transitions that test both the founder and the business.

Mohammed Al-Meshekah, founder and general partner of Outliers

“Investors and public markets look for companies that can balance aggressive growth with financial stability,” Al-Zubi said. 

Al-Meshekah agreed, saying: “The real test isn’t early traction, but instead whether the company can transition from hacking value to scaling growth, then from growth to real profitability.” 

He warned against chasing vanity metrics or unsustainable growth, stressing that “those who navigate these shifts deliberately are the ones that go the distance.” 

According to Al-Meshekah, a startup that is truly ready to scale “isn’t forcing growth; it has customers pulling the product, a repeatable engine for acquisition, and a clear path to sustainable unit economics.” 

Founders who succeed are not just fixated on their solution but are “obsessed with the problem,” he said. 

The Outliers’ founder added: “They adapt relentlessly, attract top talent, and shift from scrappy execution to scaling with precision.” 

Al-Zubi believes that the startups that reach IPO “embed financial discipline, governance, and strategic decision-making from the early days.” 

He added: “The best founders don’t just raise capital; they surround themselves with investors who challenge their thinking, push them toward scalability, and help them anticipate challenges before they arise.” 

While leadership, market fit, and financial discipline lay the groundwork for a potential IPO, Al-Meshekah argued that the role of venture capital extends far beyond funding. 

“VCs too often think their value lies only in capital and advice. But advice is cheap, and capital is a commodity,” he said. 

“Effective venture capital is not simply placing bets; they truly shape a startup’s foundation with active, hands-on partnership at the most critical moments.” 

Furthermore, Al-Zubi explained that venture capitalists who were once founders hold even greater value because they have the right empathy. 

Navigating key inflection points on the path to IPO 

As startups mature, they encounter critical inflection points that shape their ability to scale and eventually go public. 

These moments require strategic adjustments, from shifting organizational structures to strengthening financial discipline. 

Venture capital firms play a crucial role in guiding founders through these transitions, ensuring that their companies evolve in a way that supports long-term growth and IPO readiness. 

“The first major inflection point is shifting from finding product-market fit to scaling effectively,” Al-Meshekah said. 

He said that many startups get early traction, but that real scale comes only when there is genuine demand pulling the product. 

“At this stage, the right investors are in the trenches with founders as thought partners in their go-to-market motion, customer retention strategy, and organizational structure to build an effective growth engine,” Al-Meshekah added.

Beyond early scaling, startups must transition from founder-led operations to structured organizations capable of managing complex growth. 

“What worked at 20 employees won’t work at 200,” Al-Meshekah said, adding: “This is where hiring, leadership structure, and internal processes become make-or-break factors. A strong investor helps founders recruit exceptional leaders, align incentives, and avoid cultural dilution as the company grows.” 

Al-Zubi said that the first critical stage is post-seed and early growth, where founders must transition from proving product-market fit to building a repeatable, scalable business model. 

“This is when foundational decisions on hiring, expansion, and customer acquisition set the stage for long-term growth,” he said. 

Al-Zubi explained that the next major inflection point comes in the scaling phase, when companies move from early-stage agility to structured, process-driven growth.

“This is where operational efficiency, governance, and financial discipline become key,” he said. “If a company isn’t thinking about these factors by this stage, its ability to scale beyond a certain point is limited.” 

As companies approach an IPO, the emphasis shifts toward financial sustainability and governance. 

“Many companies sprint toward scale without ever proving they can operate efficiently at scale,” Al-Meshekah said. 

“At this stage, founders optimize margins, strengthen capital discipline, and shift the business model toward long-term value creation. Investors focus on bringing institutional governance and institutional processes.” 

Al-Zubi agreed that IPO readiness is not just about preparing financial statements in the final stages but about embedding public-market discipline early. 

“Startups that integrate strong governance and financial transparency early on find this transition far smoother than those that scramble to meet public market expectations,” he said.

“IPO readiness isn’t about a single moment — it’s about how a company has been built from Day 1.”


US Senate Republicans pass measure to move forward on Trump’s tax cuts

US Senate Republicans pass measure to move forward on Trump’s tax cuts
Updated 05 April 2025
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US Senate Republicans pass measure to move forward on Trump’s tax cuts

US Senate Republicans pass measure to move forward on Trump’s tax cuts
  • House Republicans now must weigh Senate’s work
  • Plunging stock market hovers over fiscal outlook

WASHINGTON: The US Senate approved a Republican budget blueprint early on Saturday that aims to extend trillions of dollars worth of President Donald Trump’s 2017 tax cuts and sharply reduce government spending.
The 51-48 vote, following a late-night legislative session, unlocks a maneuver called budget reconciliation that will allow Republicans to bypass the Senate’s filibuster — a rule that imposes a 60-vote threshold on most legislation — and pass Trump’s tax, border security and military priorities later this year without Democratic votes.
“Tonight, the Senate took one small step toward reconciliation and one giant leap toward making the tax cuts permanent, securing the border, providing much-needed help for the military and finally cutting wasteful Washington spending,” Senate Budget Committee Chairman Lindsey Graham said.
Two Republicans — Senators Susan Collins and Rand Paul — joined Democrats in opposing the measure.
The Senate’s action sent the measure on to the Republican-led House of Representatives, which is expected to take it up next week.
Non-partisan analysts say the Trump agenda, if enacted, would add about $5.7 trillion to the federal government’s debt over the next decade. Senate Republicans contend the cost is $1.5 trillion, saying that the effects of extending existing tax policy that was scheduled to expire at the end of this year should not be counted in the measure’s cost.
The measure also aims to raise the federal government’s debt ceiling by $5 trillion, a move Congress has to make by summer or risk defaulting on $36.6 trillion in debt. It aims to partly offset the deficit-raising costs of tax cuts by cutting spending. Democrats have warned that Republican targets would imperil the Medicaid health insurance program for low-income Americans.
Republicans warned that allowing the 2017 tax cuts to expire would hit Americans hard, imposing a 22 percent tax hike on the average taxpayer. The cuts, Trump’s signature legislative achievement of his first term, reduced the top corporate tax rate to 21 percent from 35 percent, a move that is not set to expire.
The remainder of the cuts, for individual Americans, were set to expire, a decision made to limit the 2017 bill’s deficit-raising effects.
“Donald Trump has betrayed the American people. Tonight, Senate Republicans joined him in that betrayal. In voting for this bill, Senate Republicans sided with billionaires against the middle class, in total obeisance to Donald Trump,” Senate Democratic leader Chuck Schumer of New York said after the vote.

BRUTAL SELL-OFF
Hanging over the debate, which began late on Thursday, was a brutal stock market sell-off following Trump’s sweeping new trade tariffs, which economists warned will drive up prices and could trigger a recession.
Some Republicans said economic uncertainty could slow the path forward for Trump’s agenda if market weakness continues.
“My concern is, if we are having the kind of conversation today three weeks from now, then the distraction will be so great that it will slow down what we try to do,” Republican Senator Thom Tillis told reporters.
During a six-hour “vote-a-rama” session to consider amendments, Senate Republicans altered the blueprint to add a deficit-neutral reserve fund to help protect Medicaid and the Medicare health care program for the elderly.
Republicans also turned away dozens of Democratic amendments aimed at rescinding Trump trade tariffs and protecting Medicaid, Medicare, nutrition support for low-income women and children, the Social Security retirement system, veterans benefits and other government assistance.
Republican Senators Lisa Murkowski, Josh Hawley and Collins backed Democratic measures to safeguard social safety-net programs, but their support was not enough.
If House Republicans get their way, Congress could enact $2 trillion in spending cuts by overhauling Medicaid and food assistance programs and by eliminating popular environmental policies.
The budget blueprint would also make room for tighter security measures along the US border with Mexico, fund administration efforts to significantly ramp up immigrant deportations and bolster US military readiness. 


Saudi banks extend $2.4bn in home loans in Feb.; demand broadens across nationals and expats

Saudi banks extend $2.4bn in home loans in Feb.; demand broadens across nationals and expats
Updated 04 April 2025
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Saudi banks extend $2.4bn in home loans in Feb.; demand broadens across nationals and expats

Saudi banks extend $2.4bn in home loans in Feb.; demand broadens across nationals and expats

RIYADH: Saudi Arabia’s banks issued SR8.91 billion ($2.37 billion) in new residential mortgages to individuals in February — a 28.33 percent annual increase, according to official data.

Figures from the Saudi Central Bank, also known as SAMA, show that apartment lending recorded the highest growth during this period, rising by 46.45 percent to SR2.9 billion.

While houses continue to dominate residential real estate financing with a 62.6 percent share, this is down from 65.24 percent in February 2024 as demand gradually shifts toward apartments.

House loans posted strong growth of 23.05 percent, reaching SR5.57 billion, yet land financing stayed modest at SR436 million, with a minimal increase of 0.61 percent.

This momentum comes as Saudi Arabia pushes toward its Vision 2030 target of achieving 70 percent home ownership.

Demand is being fueled by citizens and a growing expatriate population. A March report by Knight Frank revealed that 72 percent of Saudis and expats aspire to own homes, with the figure soaring to 93 percent among high-income citizens earning more than SR50,000 per month. Among expats, 77 percent now express a desire to buy property in the Kingdom.

Despite the strong demand, affordability remains a challenge, according to Knight Frank — particularly in cities such as Riyadh, where apartment prices have climbed 75 percent since 2019 and villa prices are up 40 percent.

To address this, Saudi authorities are rolling out a wave of regulatory and urban planning reforms. In March, the Royal Commission for Riyadh City and the Council of Economic and Development Affairs unveiled initiatives aimed at stabilizing prices and expanding access to homeownership.

These include lifting restrictions on land transactions and development in key zones of northern Riyadh, unlocking 81.5 sq. km of land for new housing and commercial projects.

At the time, Finance Minister Mohammed Al-Jadaan said the move was expected to reduce price volatility, with new plots priced at no more than SR1,500 per sq. meter and made available to Saudi citizens over the age of 25.

As part of its broader Vision 2030 strategy, Saudi Arabia has also been liberalizing real estate laws to attract more foreign investment, especially in fast-growing sectors such as tourism, housing, and special economic zones.

In 2024, officials confirmed that new regulations are underway to expand foreign ownership rights in strategic projects such as NEOM and the Red Sea.

While foreigners can already own residential property in specific zones and access 99-year leases according to the Real Estate Saudi platform, most residential mortgages are concentrated among Saudi nationals, supported by programs like Sakani and Dhamanat.

​Foreign investment in Saudi Arabia’s commercial real estate sector is subject to specific regulations and approval processes. Foreign investors are llowed to own real estate necessary for conducting their licensed business activities, including property for offices and employee accommodation, provided they obtain the requisite approval from the Ministry of Investment.

Additionally, for real estate intended for investment purposes — such as buying, selling, or leasing — the investment must meet a minimum threshold of SR30 million, with a commitment to develop the property within five years, according to the Saudi Embassy website in the US.

These measures ensure that foreign investments align with Saudi Arabia’s broader economic objectives and development plans.


Lebanon central bank must counter money laundering and terrorist financing, new governor says

Lebanon central bank must counter money laundering and terrorist financing, new governor says
Updated 04 April 2025
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Lebanon central bank must counter money laundering and terrorist financing, new governor says

Lebanon central bank must counter money laundering and terrorist financing, new governor says

BEIRUT: Lebanon’s central bank must focus on fighting money laundering and terrorist financing, its newly appointed governor said on Friday, as he began the job of salvaging the fragile banking sector and getting it off a global watchdog’s “grey list.”

The Financial Action Task Force placed Lebanon on its list of countries requiring special scrutiny last year in a move many have worried could discourage the foreign investment it needs to recover from a 2019 financial crisis that is still felt today.

Terrorist financing and money laundering are top concerns for the US, which wants to prevent Hezbollah from using the Lebanese financial system and cash flows through the country to re-establish itself.

Karim Souaid, who was appointed last week, listed his main priorities during his official handover with the outgoing acting central bank governor who preceded him.

“The most important of these are combating money laundering and terrorist financing, and identifying and disclosing politically and financially influential individuals, their relatives, and those associated with them,” he said.

Souaid replaces interim chief Wassim Mansouri, who has been overseeing the bank since long-serving governor Riad Salameh’s tenure ended in disgrace in 2023 due to the financial implosion and accusations of embezzlement, which Salameh denies.

Triggered by widespread corruption and profligate spending by the ruling class, the financial crisis in Lebanon brought the banking system to a standstill, creating an estimated $72 billion in losses.

Souaid said the central bank would work to reschedule public debt and pay back depositors, while calling upon private banks to gradually raise their capital by injecting fresh funds.

Those banks unable or unwilling to do so, should look to merge with other institutions. Otherwise, they would be liquidated in an orderly manner, with their licenses revoked and depositors’ rights protected, he said.

Souaid also pledged to safeguard the central bank’s independence from political pressure and prevent conflicts of interest.

“I will ensure that this national institution remains independent in its decision-making, shielded from interference, and grounded in the core principles of transparency and integrity,” he said. 


Office returns: Up to 59% of firms to increase investment in workplace fit-outs by 2030, says JLL 

Office returns: Up to 59% of firms to increase investment in workplace fit-outs by 2030, says JLL 
Updated 04 April 2025
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Office returns: Up to 59% of firms to increase investment in workplace fit-outs by 2030, says JLL 

Office returns: Up to 59% of firms to increase investment in workplace fit-outs by 2030, says JLL 

RIYADH: The global office sector is rebounding as companies scale back hybrid employment options, increasing demand for workspaces, a new survey shows.

The study by JLL, featured in the Global Office Fit-Out Costs Guide 2025, reveals that 59 percent of organizations are increasing investments in design and fit-outs. 

The report, which analyzes data from 68 cities across 40 countries, also highlights that office fit-out costs have risen in the past 12 months across all regions surveyed, with varying degrees of increase.

According to JLL, as in previous years, the highest fit-out costs are found in the US, Canada, and the UK, as well as Switzerland, Saudi Arabia, and the UAE.

Singapore and Japan also feature high in the list.

This correlates with the global office spaces market, which was valued at $3.1 trillion in 2022 and is projected to grow to $4.9 trillion by 2032. According to Allied Market Research, this represents a compound annual growth rate of 4.6 percent.

It also aligns with the growth of the office space market fueled by a rise in infrastructure projects for the commercial sector, including the development of new office buildings, business parks, and the renovation of workplaces in urban areas.

In a statement reflecting on the study, JLL’s CEO of Project and Development Services at Work Dynamics Cynthia Kantor said: “Five years following the start of the global pandemic, we continue to see the evolution and growing momentum toward the office sector.”

The JLL analysis further highlighted that multinational corporations must understand regional disparities in office fit-out costs to inform strategic planning.

Regionally, North America commands the highest office fit-out premium, with an average cost of 3,070 per sq. meter, well above the global average of 1,830 per sq. meter.

In Latin America, the average cost is 1,790, while in Europe, the Middle East, and Africa, the average price is 1,970. The Asia Pacific region offers the lowest average fit-out cost at $1,460.

Significant variations in office fit-out costs also exist between major urban areas. US cities lead the top 20 municipalities with the highest office fit-out costs, alongside prominent locations like Vancouver, Tokyo, London, and Dubai.

Fast-growing cities in India, South Africa, Vietnam, and China offer some of the lowest fit-out costs despite the fact they are seeing rapid construction growth and an evolving cost landscape.

Macro-economic impacts

The JLL report further sheds light on how, in the markets evaluated, increases in fit-out costs over the past 12 months were primarily driven by inflation, rising material costs, and currency fluctuations. 

Additionally, 75 percent of the markets saw a rise in raw material prices, while 50 percent experienced labor shortages that contributed to higher construction costs.

“Organizations need to factor in these potential cost factors throughout global construction when developing their fit-out budgets,” the JLL statement said.

It added that builder works or construction account for the largest component of fit-out costs  — 37 percent —  in all regions except Latin America. 

These costs can be most susceptible to raw material prices and supply chain risks. Mechanical and electrical expenses account for the second-largest cost, varying from 20 percent to 45 percent.

Sustainability continues to fuel growing demand

The study by JLL explains that as interest in healthier, energy-efficient workspaces surges and supply struggles to meet demand, the need for sustainable fit-outs is growing.

According to the survey, 60 percent of markets have seen a rise in client inquiries for more sustainable fit-outs over the past year.

This aligns with recent JLL Future of Work research, which revealed that 66.66 percent of organizations worldwide plan to increase their investment in sustainability over the next five years.

“A large part of sustainable fit-out costs are dedicated to mechanical and electrical services, which, across all countries, were found to account for an average of 29 percent of total fit-out expenses, with some regions reporting 40-50 percent of costs,” the JLL report said.

“However, these upfront costs are often where the greatest long-term cost efficiencies can be found, as research has also shown that investing in upgrades to M&E services can save between 10 percent - 40 percent on operational energy costs, depending on the level of investment and upgrade,” it added.

Investing in energy-efficient components during fit-outs and consulting with sustainability experts early in the planning phase can help incorporate sustainability requirements and costs into decision-making, thereby minimizing the risk of late adjustments, the JLL statement justified.

Optimism for offices amid caution over potential challenges

Despite a positive outlook, office fit-out development faces several challenges.

That said, the report underlines a need for global firms to address local and regional issues such as labor shortages, talent acquisition, and material availability, as well as liquidity to ensure project success.

The report also suggests that economic and political uncertainty, particularly trade and tariff implications, continue to create instability.

Consequently, early planning for lease expirations and strategic investment in existing buildings is set to benefit both landlords and occupiers, helping to manage costs and navigate the tighter timeframes caused by hesitancy around investment.

“The global office sector faces a complex landscape of challenges and opportunities in 2025,” the Director of Research and Strategy at Work Dynamics Europe, the Middle East, and Africa, Ruth Hynes, said.

“As corporate clients grow and expand their footprints, we anticipate the office construction will remain active even amid market uncertainty, and encourage early, strategic planning to ensure the success of fit-out initiatives,” Hynes added.