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Lebanon’s plan to wipe out its budget deficit next year relies primarily on Banque du Liban (BdL) as well as major cuts to payments to some state funds and the loss-making electricity company, reported Bloomberg.
Nadim Munla, a Senior Adviser to Prime Minister Saad Hariri, said that the central bank will waive coupon payments received from the Treasury as part of steps to lower the budget deficit to 0.6 per cent of gross domestic product. Bond investors will not be affected, he said.
Munla said that the central bank holds 65 per cent of the country’s sovereign debt, which is mostly denominated in local currency.
“We wanted to send a clear message that Lebanon is serious about handling its budget deficit, said Munla. The shortfall was just under 12 per cent of GDP in 2018.
Munla said a cabinet reshuffle was still on the table and will be decided in the coming days.
The government will also stop borrowing at higher rates to finance the budget, he said. Capital spending will be covered by borrowing at “concessional” rates from outside the budget.
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