Lebanon Appeals for Import Credit as Crisis Sparks Dollar Crunch
(Bloomberg) -- Lebanon’s caretaker premier sought credit offers from allies Saudi Arabia, France and the U.S. to cover critical imports as the nation’s economic and political crisis fuels a shortage of dollars.
Saad Hariri, who resigned in late October in the face of mounting nationwide protests against an elite demonstrators accused of mismanagement and corruption, also sent letters to the leaders of Russia, Egypt, Turkey, China and Italy, according to his party’s website. He said Lebanon needed assistance to counter a “liquidity shortage” and ensure food security.
The dollar crunch has worsened as the central bank attempts to protect its foreign reserves and ease pressure on the Lebanese pound’s peg to the U.S. currency. A parallel rate has emerged for the pound higher than the fixed regime of 1,507.5 to the dollar. Banks have tightened restrictions on the movement of capital with some even freezing credit lines for importers and others refusing to dispense dollars.
To keep its lenders stable and defend the peg, Lebanon relies on inflows from the millions of its citizens living abroad. However, capital inflows needed to finance the large current account and fiscal deficits have slowed as confidence has dwindled; outflows have gathered pace.
Lebanon has been convulsed by weeks of nationwide protests that toppled Hariri’s government and raised investor concern that the country, one of the most indebted in the world, might struggle to pay bondholders.
Hariri and other officials had earlier asked Gulf countries for financial aid to help alleviate the financial crisis but received only promises of assistance.
On Friday, President Michel Aoun said he discussed Lebanon’s plight with representatives of Morgan Stanley and other finance institutions, ahead of planned Monday talks with political factions on naming a new premier.
The meeting covered a proposed economic reform plan, Aoun said on Twitter.
Samir al-Khatib, a businessman, has emerged as a leading candidate to replace Hariri.
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