Dubai: Saudi Arabia will support Lebanon “all the way” to protect its stability, the Saudi finance minister said, after Qatar announced it would buy $500 million (Dh1.83 trillion) worth of US dollar bonds issued by Beirut to support the Lebanese economy.
Lebanon has one of the world’s highest levels of public debt as a proportion of national output and its economy is stagnant.
International lenders are seeking urgent reforms before releasing billions of dollars in investment, but Lebanon still has no government more than eight months after an election.
Qatar, which is locked in a bitter diplomatic dispute with Saudi Arabia and other Gulf states due to Doha’s support for extremism in the region, said on Monday it would invest $500 million in Lebanese government bonds to support the country’s economy.
Saudi Arabia didn’t wait long to respond after Qatar announced its decision to buy Lebanese bonds.
“We are interested to see stability in Lebanon and we will support Lebanon all the way,” Saudi Finance Minister Mohammad Al Jadaan told CNBC in Davos on Tuesday, providing no further details. “We are also determined to make sure that we play our role as a catalyst of stability in the region.”
Political disputes between a pro-Saudi bloc and the Iranian-backed Hezbollah have prevented the formation of a government since May, undermining plans for reforms that would unlock $11 billion in aid.
Saudi Arabia has been a long-standing supporter of Lebanese Prime Minister-designate Saad
Hariri, who has Saudi citizenship.
However relations with Lebanon are seen as less strong after Hariri was invited to Riyadh a year ago from where controversially resigned as prime minister, only to rescind his resignation when he reached Beirut.
Saudi Arabia denied holding him hostage.
Saudi Arabia, the United Arab Emirates, Bahrain and Egypt cut diplomatic, trade and transport ties with Qatar in June 2017 over accusations that Doha supports terrorism and is cosying up to their arch foe Iran.
Qatar’s purchase alone is unlikely to be a game changer for Lebanon. The central bank has maintained stability through stimulus measures and financial engineering, made possible by the billions of dollars placed in Lebanese banks by the nation’s diaspora.
As deposit inflows have slowed and reached an estimated $4 billion to $5 billion in 2018, Moody’s Investors Service said Lebanon would need as much as $7 billion to cover this year’s fiscal deficit and Eurobond maturities without tapping foreign-exchange reserves.
Lebanon’s public debt, estimated at over 160 per cent of gross domestic product this year, is projected to rise to near 180 per cent by 2023, second only to Japan’s, according to the International Monetary Fund. Moody’s downgraded Lebanon’s credit rating deeper into junk on Tuesday, hours after Qatar unveiled its plan.