Lebanon Adopts Market Rates to Deal With Debt

Lebanon’s finance ministry and central bank have come up with a new plan to finance the debt-burdened country, the Financial Times reported. But their method is set to increase its cost of financing even further, as the government starts issuing local currency debt at market rates — higher than the rates treasury bills are currently issued at — in order to attract local banks. Nearly nine months since elections in May, Beirut remains locked in political stalemate without a government, impeding fiscal reforms badly needed to alleviate economic stagnation and a ballooning public deficit. Lebanon, a small Mediterranean country with a total population estimated at about 6m, carries the world’s third highest debt-to-GDP ratio at 155 per cent. The new move agreed last week between the finance ministry and Banque du Liban (BdL) is expected to encourage local lenders, who had favoured depositing dollars at the BdL for higher interest rates, to return to buying government debt. Read more