BEIRUT, June 9 (Reuters) – Lebanon’s central bank governor said on Tuesday he hoped the country would be able to issue more dollar-denominated debt this year and that the government should not rely on the central bank’s foreign reserves to repay debt.
He was speaking ahead of upcoming bond maturities worth $1 billion. A treasury source quoted by IFR, a Thomson Reuters unit, said on Monday they would be repaid using foreign exchange reserves.
The bonds are worth $500 million each and are due on June 12 and August 6 respectively.
“The Ministry of Finance has a creditor balance in Lebanese pounds at the central bank. They have the right to use that balance to repay the debt if they don’t want to make a new issue now,” Central Bank Governor Riad Salameh told Reuters on the sidelines of a finance conference.
Lebanon’s budget laws would have to be amended if the sovereign wanted to issue new debt this fiscal year, as the proscribed limit has already been reached.
“I hope that they will be able to do it,” Salameh said when asked if Lebanon could issue new dollar-denominated debt this year. But he said they would need to find “the proper timing” for a parliamentary meeting regarding passing a new law.
“They will need probably a new law in parliament, but it is the responsibility of Ministry of Finance to fund the country in foreign currency and they should not rely on the reserves of the central bank,” Salameh said.
However, the treasury source told IFR that an exchange process under which debt was swapped for new bonds would not contravene the law.
Lebanon’s government has been paralysed by infighting exacerbated by the war in neighbouring Syria. The government, formed last year with Iranian-Saudi blessing, has struggled to take even the most basic decisions.
The central bank has been widely seen as one of the most dependable institutions in Lebanon, and has promoted initiatives usually put forward by governments, such as economic stimulus packages. (Reporting by Sylvia Westall; Writing by David French; Editing by Raissa Kasolowsky)