Hassan: Lebanon closes 10-year $1.2 billion Eurobond

10 March 2010

BEIRUT: Lebanon successfully closed a $1.2 billion Eurobond issue with a 10-year maturity and a yield of 6.375 percent, Finance Minister Raya Hafar Hassan announced on Tuesday.

She also confirmed that the Finance Ministry has not yet decided to include higher taxes in the 2010 draft budget.

The Daily Star on Monday quoted a source at the Finance Ministry as saying that Hassan has not yet included higher taxes in the draft budget.

Hassan said that 30 percent of the Eurobonds issue was snapped up by foreign investors and the Eurobond was three times oversubscribed.

“The success of the Eurobonds issue reflects the confidence of investors in the Lebanese economy, its positive indicators and the course of reforms carried out by the government,” the minister told a press conference at the Finance Ministry headquarters.

The Lebanese government usually taps local and foreign markets to finance the public debt, which currently stands at $51.5 billion.

The last Eurobonds was co managed by BLOM, Fransabank and BNB Paris Bas.

“The appetite for these Eurobonds was enormous and we received requests from 90 local and foreign investors. Some of these demands came from the United States, Europe and other countries,” the minister said.

She added that the interest rates offered by the Lebanese government were far lower than those offered by the Greek government and lower by 10 basis points than Athens.

“The interest rates that offered for us were 6.5 percent but this offer was eventually dropped to 6.375 percent due to the high demand. This will improve the credit rating of the country,” Hassan said.

The minister said the Finance Ministry would resume issuing treasury bills April in collaboration with the Central Bank.

The Central Bank has refrained from issuing more T-bills over the past few months.

“We have discussed with the parliamentary Finance and Budget Committee for the issue of the government’s account at the Central Bank, which is worth LL6.5 trillion. But this cash reserve fell to LL4.8 trillion at the end of last month. We told the committee we need to keep these accounts at the Central Bank to meet certain government dues,” Hassan said.

She added that this surplus is designed to cover the cost of the debt servicing, stressing that it is crucial not to touch this surplus because this cash will be used in case of emergency.

The minister denied media reports that the new draft budget would include higher taxes, a subject still stirring controversy among the public.

“What we are doing now is determining the level of spending in the budget. These allocations cover current accounts like salaries of government employees, electricity and cost of debt servicing,” she explained.

Hassan added that Prime Minister Saad Hariri had insisted that any new budget should not negatively affect the deficit in spending.

“We are determined not to see the size of the public debt rise any more. This decision is final for us,” she emphasized.

She added that the ministry has several choices concerning the rise in spending and one of them could include higher taxes, but only on the condition that this choice would not adversely impact low-income families in Lebanon.

“The other choice we are considering is to encourage the private sector take part in some infrastructure projects instead of raising taxes and borrowing more money,” Hassan said.

The minister added that the final draft of the budget would be sent to the Cabinet in the coming weeks for deliberations.

Previous governments since 2005 never sent their budgets to the Cabinet or Parliament for approval. – The Daily Star