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French Version


Lebanon's foreign reserves stable (Daily Star)

Central bank governor downplays moody's negative report

Central Bank Governor Riad Salameh said on Tuesday there were no dramatic changes in either the foreign currency reserves or the deposits of commercial banks despite the assassination of former Prime Minister Rafik Hariri and the recent spate of bombings.

"The foreign-currency reserves now stand at $10 billion, excluding the gold reserves, while bank deposits are estimated at $59 billion," Salameh told The Daily Star.

The governor also downplayed a report by rating agency Moody's which lowered Lebanon's B2 country ceilings for long-term foreign-currency bonds and bank deposits to B3.

He added that Moody's report of $8 billion in foreign-currency reserves is not accurate, adding that the rating agency did not even check with the Central Bank to verify the figure.

"Other rating agencies did not show concern about the fate of the country's foreign-currency reserves and bank deposits."

Salameh was reacting to Moody's report last week that lowered Lebanon's foreign-currency reserves and bank-deposit ratings.

The governor stressed that there were no major outflows of capital from Lebanon.

However, Salameh said $1 billion from the deposits were withdrawn since the crisis but most of the money remained in the country.

He said the Central Bank has swapped one-year, two-year and three-year treasury bills held by commercial banks.

The Central Bank increased the yields on all three categories by 1 percent, 2 percent and 3 percent respectively.

Salameh also said that if the political bickering in the country simmers down then the market will restore its confidence.

"The Central Bank is in full control of the monetary situation and the initial reaction was expected given the magnitude of the incident," he said, referring to the aftermath of Hariri's assassination.

Salameh said the Central Bank does not plan to take extra measures in the market because the situation in not dramatic.

Moody's said that the new ceiling reflects the deterioration in Lebanon's political and economic environment since Hariri's murder.

The B2 rating for the government's long-term foreign-currency bonds has also been lowered to B3. The rating for the government's long-term local-currency bonds remains at B3. The outlook on the country ceilings for long-term foreign-currency bonds and bank deposits, and the outlook for the government's long-term foreign-currency bonds, have been changed from negative to stable. The outlook for the government's local-currency bonds remains negative. The local-currency guideline has been lowered from Baa2 to Ba1.

Moody's said that Lebanon's short-term political risk has increased since Hariri was killed in a massive bomb blast in February. It added that the death of the former prime minister has fueled anti-Syrian sentiment, increasing tensions between the anti-Syrian opposition movement (dominated by Christians, Sunni Muslims and Druze) and the pro-Syrian government, which is largely supported by the country's populous Shiite Muslims.

However, Moody's notes that there is a potential upside risk from recent developments over the longer term. "If Syria fully withdraws its forces under international pressure, parliamentary elections go ahead as planned and an effective government is formed that is acceptable both internally and externally, then it is likely that political stability will be restored," Moody's said.

It added that Lebanon may then be able to mobilize international financial support and thereby reduce its crippling public-debt stock. Nevertheless, Moody's believes that the significant risk of deterioration in the political and economic environment, at least over the short term, warrants the changing of Lebanon's B2 ratings to B3.The Central Bank said in its monthly bulletin on Tuesday that the total public debt went up by 5.31 percent to $33 billion. The bulletin also said that the accumulated balance of payment recorded a surplus of $1068.5 million at the end of 2004. Total bank assets in 2004 jumped by 12.76 percent while customer deposits rose by 12.57 percent.

Beirut 04-04-2005
Osama Habib
The Daily Star



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