Lebanon will probably restructure debt, foreigners will be paid-senior banker

Salim Sfeir, chairman of the Association of Banks in Lebanon and chief executive of Bank of Beirut, is pictured during an interview with Reuters in Beirut, Lebanon. (File/Reuters)
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Updated 13 January 2020

Lebanon will probably restructure debt, foreigners will be paid-senior banker

  • One of the world’s most heavily indebted states, Lebanon is mired in a deep financial crisis
  • The crisis is rooted in decades of state corruption and bad governance

BEIRUT: Lebanon’s sovereign debt is probably going to be restructured in a way that hurts neither the economy nor depositors, and foreign holders will be repaid, the banking association head said on Monday.
Salim Sfeir also said he did not foresee problems with a proposal for Lebanese banks to swap their holdings in a maturing March Eurobond of $1.2 billion for longer dated notes, describing such swaps as “common practice.”
Central bank governor Riad Salameh has proposed the swap to Lebanese banks though it is up to the government to decide, senior financial and government sources said.
One of the world’s most heavily indebted states, Lebanon is mired in a deep financial crisis. A dollar shortage has led banks to control access to deposits and block transfers abroad.
Sfeir, the Bank of Beirut’s chief executive, said he had not seen such a crisis during his 50 years in banking.
“Everything we are doing is to preserve the wealth of Lebanon in Lebanon. If not, it will evaporate and Lebanon will be left without liquidity or foreign currency needed for essential goods,” he told Reuters.
“What is being done now is not against the people. Their money is secured and, let me add, the pressure is not from the large depositors.”
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The crisis is rooted in decades of state corruption and bad governance. Lebanon’s gross public debt is $89.5 billion, 38% of it in foreign currency. Lebanese investors hold the bulk of the debt. Foreigners hold 30% of the Eurobonds.
“Probably the debt is going to be restructured in one way or another but without affecting the deposits of the people and they are currently working to assure that,” Sfeir said. This would “give more oxygen in order to stimulate our economy.”
Asked how the restructuring should take place, Sfeir said this would be the responsibility of a new government. But the general idea is that “interest rates would go down and maturities would be extended.”
Politicians have failed to agree a new government or a rescue plan since Saad Al-Hariri quit as prime minister last October.
Lebanese Eurobonds of $2.5 billion are set to mature this year.
“Of course foreign holders will be repaid,” Sfeir said.
He said the aim was “not to leave any hard feelings with the international community.”
“By restructuring, let us define what we mean. Restructuring is not hurting anybody. Restructuring is working on (maturity) time and interest rates. It does not mean surgical operations,” he said.
Sfeir also said he opposed the formalization of the banking controls, saying it would then be “difficult to return to normal practice.”
The central bank told banks to increase their capital by 10% by the end of 2019 and a further 10% by June 30, 2020, to help them withstand the crisis.
All banks are working on this, Sfeir said.
“Now what is the probability of success with each and every bank? I don’t know, but I don’t anticipate major difficulties,” he said.


Dubai to support Emirates airline, closes tourist market

Emirates airline is vital to the Dubai and UAE economy. (Shutterstock)
Updated 2 min 32 sec ago

Dubai to support Emirates airline, closes tourist market

  • Dubai’s Crown Prince Sheikh Hamdan bin Mohammed said the emirate’s government would inject fresh equity into the Emirates airline, considering its strategic importance to the Dubai and UAE economy

DUBAI: Dubai said on Tuesday it would help its state-run Emirates airline overcome the damaging impact of the coronavirus outbreak and enforced a full lockdown on a district famous for its gold and spice markets.
The UAE, the region’s tourism and business hub, has taken drastic measures to combat the spread of the virus including temporarily halting passenger flights and launching a nationwide disinfection drive.
It had already extended a nightly curfew to April 5 to deep clean the country, but Dubai announced late on Monday that a 24-hour curfew would be imposed on the normally bustling tourist and trade district of Al Ras for two weeks.
“I am glad they are doing this because it is for our protection,” said one rice trader who works in Al Ras but resides in the UAE’s Sharjah emirate. The trader, who declined to be named, told Reuters he is now conducting business online.
Dubai closed the main road entrances to Al Ras and halted public transport to the area, which abuts Dubai Creek, where dhows have been banned from shipping goods between Dubai and Iran, a regional epicentre for the virus. Authorities would provide residents with essential needs, the Dubai Media Office said.

HIGHLIGHTS

● Dubai to inject fresh capital into state airline.

● Historic Dubai tourism and trade district under lockdown.

● Coronavirus cases pass 3,700 in the six Gulf Arab states.

The UAE has confirmed 611 coronavirus cases, with five deaths. It plans to open more drive-thru testing centres after the first was opened last week in the capital, Abu Dhabi.
“We will never hesitate to take any measures against any potential threat to people’s life. At the same time, we won’t let development grind to a halt,” Abu Dhabi Crown Prince Sheikh Mohammed bin Zayed Al-Nahyan, the country’s de facto ruler, said in comments carried on state media.
Dubai’s Crown Prince Sheikh Hamdan bin Mohammed said the emirate’s government would inject fresh equity into the Emirates airline, considering its strategic importance to the Dubai and UAE economy.
The total number of infections in the six Gulf Arab states stands at more than 3,700, with 18 deaths.
In Kuwait, the first Gulf state to halt passenger flights and impose a partial curfew, the health minister said a clearer picture on the success of containment efforts would emerge by early June “If infection numbers stabilize, there may be a gradual easing of current measures,” Basil Al-Sabah told Al Rai newspaper. “But if the average rate of transmission increases then ... I do not rule out the cabinet enforcing a full curfew.”
Kuwait recorded 23 new infections on Tuesday to take its total to 289. Saudi Arabia, has passed 1,400, with eight deaths.