May 21, 2019 / 2:45 PM / a month ago

Lebanon paid $650 million maturing eurobond on Monday with central bank help -sources

LONDON, May 21 (Reuters) - A $650 million Lebanese eurobond was repaid successfully with sources familiar with the matter saying the central bank provided funding to the finance ministry to meet the payment.

The redemption on Monday is important as market concern had been growing about an impasse over Lebanon’s budget acting as an obstacle to the country raising new debt.

The dollar-denominated debt, which expired on Monday, had been Lebanon’s latest debt maturity, ahead of a $1.5 billion issue due in November. Lebanon had been expected to service the May debt via a government financing manoeuvre involving the central bank.

An informed source said the government paid its eurobond in the same way as the $500 million tranche in April, with the central bank providing the needed dollar currency to the finance ministry, the original issuer of the debt.

A second source said the funding was in the form of a bridge loan to help pay local banks, the main holders of the debt.

Lebanon’s net foreign assets, which stood at $37.3 billion on May 15, have fallen from $42.9 billion a year earlier.

Finance Minister Ali Hassan Khalil said on Tuesday there was no need for more delays or talks over the 2019 draft budget, although the foreign minister signalled the debate may continue.

The cabinet says the budget will reduce the deficit to 7.6% of GDP from last year’s 11.2%. Lebanon has one of the world’s heaviest public debt burdens at 150% of GDP.

Lebanon’s main expenses are a bloated public sector, interest payments on public debt and transfers to the loss-making power generator, for which a reform plan was approved in April. The state is riddled with corruption and waste.

Additional reporting by Tom Perry in Beirut and Karin Strohecker in London Editing by Mark Heinrich

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