Cash injection required: Lebanon's PM pins hopes on UAE

Lebanon is grappling with low growth, crumbling infrastructure - and one of the world's highest debt burdens.

    Prime Minister Saad Hariri (centre) hopes Lebanon's Gulf allies or regional sovereign wealth funds will offer support, but no public pledges have so far been made [Satish Kumar/Reuters]
    Prime Minister Saad Hariri (centre) hopes Lebanon's Gulf allies or regional sovereign wealth funds will offer support, but no public pledges have so far been made [Satish Kumar/Reuters]

    Lebanon hopes the United Arab Emirates will inject cash into its central bank to help shore up the economy, Prime Minister Saad Hariri said on Monday during a visit to the Gulf state, while one of his advisers said the mood was "positive".

    Abu Dhabi is hosting a conference at which Lebanon is seeking partnerships and investments in food, infrastructure, oil and gas and renewable energy. The UAE economy minister said financing for Lebanon would be discussed later on Monday. 

    Faced with one of the world's highest debt burdens, low growth and crumbling infrastructure, Hariri's government has pledged to implement long-delayed reforms. It is also seeking to curb a sharp loss of confidence among foreign investors and among depositors who are turning away from the Lebanese pound.

    Asked on the conference sidelines whether Lebanon will see a cash injection for its central bank, Hariri told Reuters news agency: "We are working on everything," adding: "Yes we are hoping, we will work on it."

    The central bank has been drawing down its foreign exchange reserves to repay the state's maturing dollar-denominating debt, and said last week it was prepared to do more.

    Central bank governor Riad Salameh, also attending the conference, said the bank was continuing to provide dollars to local financial markets, adding that Lebanon has "numerous possibilities" as it looks for assistance. 

    Lebanon's traditionally high reserves of foreign currency have been in decline due to a slowdown of capital inflows into its banking system from Lebanese people abroad.

    An adviser to Hariri, Ghattas Khoury, told Reuters the mood at the conference was positive and that there would be a meeting between the Lebanese premier and the UAE authorities later on Monday.

    Beirut hopes its Gulf allies or regional sovereign wealth funds will offer support, but no public pledges have so far been made. 

    UAE economy minister Sultan bin Saeed al Mansoori told reporters his government believes Lebanon's investment climate is becoming more "settled".

    He made no financing commitments, but said any financing would "be discussed with the government and they'll make the right decision".

    Lebanon is preparing to sell a eurobond of about $2bn this month, with the cash raised earmarked for refinancing maturing debts and shoring up shaky public finances.

    On October 1, Moody's put Lebanon's Caa1 credit rating under review for downgrade, saying anticipated external financial assistance had not yet been forthcoming. 

    Ratings agency Fitch downgraded Lebanon to CCC in August, citing debt servicing concerns.

    At the same time, S&P Global affirmed Lebanon at B-/B with a negative outlook, saying it considered foreign exchange reserves sufficient to service government debt in the "near term".

    SOURCE: Reuters news agency