ABU DHABI, Sept 29 Lebanon's central bank has
been selling some of its holdings of international bonds issued
by the Lebanese government to improve its foreign currency
liquidity, central bank governor Riad Salameh said on Sunday.
"The central bank has sold from its own portfolio the
equivalent of $5 billion this year. During the month of
September alone we sold $1.1 billion," he told reporters on the
sidelines of an Arab central bankers' meeting in Abu Dhabi.
"These are Republic of Lebanon Eurobonds that the central
bank was carrying in its portfolio. We liquidated that to
improve the quality of our balance sheet in terms of improving
liquidity in foreign currency."
He did not elaborate on the sales of Lebanese bond holdings.
The central bank held 25.45 trillion Lebanese pounds ($16.9
billion) worth of securities in July, down from a peak of 26.92
trillion pounds in April, according to central bank data.
The yield on Lebanon's $650 million bond maturing in 2019
is up 52 basis points since late May to 6.27
percent, outperforming the bonds of many emerging market
economies. Lebanese commercial banks are often keen buyers of
Lebanese government debt offered in the secondary market.
Lebanon's economy has suffered over the past two years as
the civil war in neighbouring Syria has caused capital inflows
to dry up, although the total size of its foreign reserves has
held up and there does not appear to have been heavy pressure on
its currency peg to the U.S. dollar.
On Lebanon's foreign exchange reserves, Salameh said: "We
are running over $36 billion of liquid foreign assets. Gold is
evaluated around $16 billion....We have improved from last year
in terms of liquidity."
Maintaining ample deposits in the banking sector is key to
keeping the government funded, since the banks use some of those
deposits to buy state debt. Salameh said: "Total deposits in the
banking sector have grown by 8 percent - it is essentially
driven by a non-resident increase in deposits.
"Last year, we ended up with a 7 percent growth," he added.
Salameh said the central bank's expectation of 2.0-2.5
percent growth in gross domestic product this year was in line
with the impact of political instability on the economy. He
predicted inflation would be below 4 percent in 2013, "which is
in line with the central bank objectives."