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01 October 2023

Saudi Arabia to deposit $1bn in Lebanon central bank

By Staff Writer


Saudi Arabia plans to deposit $1 billion (Dh3.67bn) at Lebanon’s central bank to boost foreign currency reserves and support the government’s economic reform drive. But the gesture received mixed reactions from bankers and economists in the country.

“After some rating agencies cut their sovereign rating of Lebanon as a result of the political deadlock, Saudi Arabia apparently took this step to improve the rating of the country and encourage the swapping of the matured Eurobonds,” Saad Andary, the adviser to the chairman of Bank of Beirut and the Arab countries, told The Daily Star.

However, economist Elie Yashoui interpreted the Saudi gesture as nothing more than a political support for the Government of Premier Fouad Siniora.

“Why would Saudi Arabia boost the central bank’s foreign currency reserves, which currently stand at more than $11bn, excluding the gold reserves which are valued at close to $9bn?

This means that we have about $20bn in reserves and there is no need for more,” Yashoui said.

One banker said the deposit is expected to take place as soon as the procedures are finalised and will carry an interest rate equivalent to the prevailing rate.

However, Yashoui said the Saudi deposit would not carry an interest rate.

“This deposit is considered as loan but with no interest payment on it. The Saudis want to send a clear message the kingdom will back the government at any cost,” he said.

The move would bring to $2bn the total amount that Saudi Arabia pumped into Lebanon, after the kingdom deposited $1bn at the bank, when the national currency was under pressure during the 2006 war between Israel and Hezbollah. Kuwait also deposited $500 million in 2006 as a show of support.

“This step will help rejuvenate the Lebanese economy,” Andary said, adding some foreign investors seem keen to subscribe to the Lebanese Eurobonds.

He added the Saudi initiative will revive interest in Lebanese bonds and Eurobonds this year.