Lebanon's banks to buy $4bn in interest-free government bonds

17 December 2002

Lebanon's commercial banks agreed on 11 December to subscribe to $4,000 million in interest-free government bonds to assist in reducing the enormous public debt, the local Daily Star reported. Banque du Liban (Central Bank) will issue the bonds in early 2003, and said in a statement that the banks would buy either six-month treasury bills or two-year eurobonds. 'This is an exceptional measure by the commercial banks,' said the statement. Official estimates are that the arrangement will cut debt servicing costs by about $400 million. The $4,000 million amounts to about one tenth of the banks' total deposits. Banking industry sources were quoted in the Daily Star as saying the move would have no negative impact on other depositors, and would not lead to higher interest rates on their private sector loans.

At the Paris II donors' conference on 23 November Prime Minister Rafiq Hariri secured $4,400 million in concessionary loans from international creditors, of which $3,000 million is also to go towards reducing debt servicing costs through the replacement of more costly debt (MEED 29:11:02). Before these two steps, Lebanon was paying average interest of about 13 per cent on its debt.

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