Former Lebanon economy chief in plea for $25bn bailout plan

Nasser Saidi. (AFP)
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Updated 05 February 2020

Former Lebanon economy chief in plea for $25bn bailout plan

  • Rescue package needed ‘to restore confidence’ and kick-start major banking reforms

PARIS: A former Lebanese economy and trade minister has called for a second Paris summit to bail out the debt-ridden nation with financial support of up to $25 billion.

Nasser Saidi, who is also a former deputy governor of Lebanon’s central bank, told Arab News that restructuring of the country’s banking system is needed urgently and that “depositors should not have to pay for banks’ mismanagement.”

Financial support of between $20 billion and $25 billion is needed “to restore confidence,” he said.

The former minister’s comments come almost two years after a Paris conference rallied international support for an $11 billion investment program in Lebanon. More than 50 countries, including Saudi Arabia, the US and Russia, took part in the summit alongside the World Bank, the IMF and major finance institutions.

Saidi told Arab News: “We need to address Lebanon’s debt burden as part of a comprehensive macro-economic fiscal, financial, banking and currency reform program. The debt problem cannot be viewed in isolation.”

The country’s sovereign debt is now running at $90 billion, or 160 percent of gross domestic product (GDP), he said. The cost of servicing the debt is around $10 billion, which is 22 percent of GDP and more than 65 percent of government revenue — “a debt burden that is totally unsustainable.”

Lebanon’s central bank also owes $120 billion to the country’s banks that it is unable to repay. “So when we talk about the problem, it means addressing the sovereign debt problem and the central bank debt problem,” Saidi said.

He said the $11 billion in infrastructure spending promised at the 2018 Paris meeting “is no longer relevant because Lebanon’s financial circumstances have changed radically.”

“Lebanon is in a recession that will become a depression, meaning that GDP might decline by 8 to 10 percent this year,” the former minister warned. “An economic stabilization fund of around $20 to $25 billion is required for balance of payments problems, dealing with liquidity at the banks and, at the same time, it would need to be accompanied by a restructuring of the banking system.

Saidi urged major shareholders to help Lebanon’s struggling banks recapitalize with cash injections drawn from past profits.

“Recently Bank Audi sold its subsidiary in Egypt. Other banks should sell their subsidiaries outside and bring their money home. They may have other investments they can liquidate, such as real estate, in order to increase capital.”

The former minister claimed that “with the $25 billion Lebanon requires, confidence will be restored, and you can start attracting capital back into the country.”

Commenting on recent government reforms in the energy sector, including electricity, Saidi said: “It is totally unrealistic; power plants can be built in six months. We need to stop corruption and waste. GE, Siemens and the Chinese can build plants in six months. The fuel bought now is priced above international prices, so the government should approach Gulf countries and ask them to supply us with fuel at international prices or even lower, in line with what they did for Egypt in the past.

“That would reduce our fuel and electricity bill by $3 billion. This package needs to be completed with a social safety net since, according to World Bank figures, one-third of the Lebanese population is living below the poverty line,” he said.
 


Abu Dhabi’s Mubadala to invest €1bn in French state-backed fund

Updated 21 min 4 sec ago

Abu Dhabi’s Mubadala to invest €1bn in French state-backed fund

  • State-backed investment bank Bpifrance and Mubadala will both commit €1bn to the fund to support French companies
  • Bpifrance has said it aims over time to raise up to €10bn for the fund, which is to be used to shore up the capital of French companies

ABU DHABI: Abu Dhabi state investor Mubadala Investment Company will invest €1 billion ($1.08 billion) in a new French state-backed fund to support French companies, France’s finance minister said on Monday.
State-backed investment bank Bpifrance and Mubadala will both commit €1bn to the fund which will launch next month, Finance Minister Bruno Le Maire said. Additional commitments from institutional investors such as insurers will bring the total invested to four billion, he said.
“The first foreign sovereign investment fund to invest in the French fund is Abu Dhabi’s,” Le Maire told reporters during a visit to Abu Dhabi.
“It’s sends a strong signal that Abu Dhabi’s fund is investing €1bn.”
Bpifrance has said it aims over time to raise up to €10bn for the fund, which is to be used to shore up the capital of French companies facing activist investor campaigns or adapting their business models or shareholder bases.
Bpifrance’s pitch on the fund to outside investors has said it would deploy capital in about 15 companies with a time horizon of 10 years.
Mubadala said in a statement that it saw “significant investment opportunities” in France and said that the fund would invest in companies with “compelling returns.”