The funds will help calm investor concerns that Lebanon is on the brink of a financial meltdown sparked by political turmoil and doubts over its ability to repay debts.
Wednesday 06, February 2019
(Bloomberg) --Lebanon is in talks with allies to secure financial backing that would help it manage one of the world’s highest debt burdens.
The support could come in the form of deposits or a purchase of Lebanese Eurobonds at reduced interest rates, Nadim Munla, senior adviser to Prime Minister Saad Hariri, said in an interview on Tuesday in Beirut. He declined to name the countries involved in the talks.
The funds will also buy the Lebanese government much-needed time to implement steps agreed with international donors in return for $11 billion in aid.
“We are actively pursuing friendly countries to help us mitigate the short-term crisis we have faced because of the delay in the formation of the government,” Munla said. With the money, Lebanon would be able to reduce the cost of debt servicing, he said.
After Qatar’s pledge, Saudi Arabia’s finance minister said the Kingdom would support the economy all the way without giving details.
The newly-formed government will soon announce a plan to eventually slash costly subsidies to the state-owned electricity company, Munla said, a move that would save hundreds of millions of dollars a year. Other proposals under discussion include the implementation of a programme to overhaul the public sector.
The plans were agreed last year with donors and lenders, including the World Bank, to help revive economic growth and reduce the budget deficit by one percentage point a year over five years.
Spending, however, increased in 2018 as oil prices and interest rates climbed. Lebanon’s public debt, estimated at over 160 per cent of gross domestic product this year, is projected to rise to near 180 per cent by 2023, second only to Japan’s, according to the IMF.