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Sun 10 Feb 2019 12:52 PM

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Lebanon expects allies to help maintain pound's stability

Saudi Arabia's finance minister saying last month that the kingdom would support Lebanon 'all the way'

Lebanon expects allies to help maintain pound's stability
Deputy Prime Minister Ghassan Hasbani

Lebanon anticipates allies will help it maintain the pound’s stability by depositing money with its central bank, Deputy Prime Minister Ghassan Hasbani said on Sunday.

Lebanon is looking “to have the confidence of Arab countries and other countries to place large deposits in the central bank of Lebanon, which is something that could happen fairly soon,” Hasbani told Bloomberg Television at the World Government Summit in Dubai.

Lebanon, one of the world’s most indebted countries, has sought to mobilise support and allay investor concerns that it risks a financial meltdown driven by political turmoil and doubts over its ability to repay creditors. The government, which was formed recently after nine months of deadlock, also needs time to implement steps negotiated with international donors in return for $11 billion in aid.

‘All the way’

Lebanese officials have already hinted that some countries would step up, with Saudi Arabia’s finance minister saying last month that the kingdom would support Lebanon “all the way.” He didn’t give details.

Hasbani said it’s too early to say how Saudi Arabia might offer more backing, in addition to what it pledged at the donor conference in Paris. It “may not come in the form of assistance as much as in the form of deposits in the central bank,” he said.

Wealthy Gulf states have often doled out money by placing funds on deposit with central banks to boost liquidity and reserves. Recent recipients of such support packages include Pakistan and Jordan.

Moody’s Investors Service estimates the budget deficit probably widened to 10.5 percent of gross domestic product last year, up from its previous expectation for 8.9 percent. The ratio of debt to GDP will exceed 150 percent by 2021 from a forecast level of 141 percent in 2018, according to the rating company.

The Lebanese government’s priority now is reducing the budget deficit and starting a major investment program in infrastructure to spur growth and attract private investments, Hasbani said.

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