BEIRUT- Lebanon has begun preparing to issue a Eurobond of around $2 billion in October to meet state financing needs, Finance Minister Ali Hassan Khalil told Reuters on Monday.

"The Finance Ministry has started the preparatory steps for the issuance of Eurobonds of around $2 billion in the coming month," Khalil said. "The interest rates are linked to the market."

Lebanon, one of the world's most heavily indebted states, has a $1.5 billion Eurobond to repay in November.

Central bank governor Riad Salameh said earlier on Monday that interest rates on Lebanese bonds traded on secondary markets were inflated.

Lebanon's traditionally high reserves of foreign currency have been in decline because capital inflows into its banking system from Lebanese abroad have been slowing.

The central bank's foreign assets, excluding gold, fell around 15% from an all-time high in May last year to $38.7 billion in mid-September.

Lebanon is aiming to drive through long-postponed reforms to put the public finances on a sustainable path.

(Reporting by Laila Bassam; Writing by Tom Perry; Editing by Kevin Liffey) ((thomas.perry@thomsonreuters.com; Reuters Messaging: thomas.perry.reuters.com@reuters.net))