(Updates to combine request to hold off on bond swaps, request for central bank to specify new powers sought, context)
BEIRUT, Jan 15 (Reuters) - Lebanon’s caretaker finance minister has asked the central bank governor to hold off on a proposed swap of 2020 Eurobonds after ratings agencies warned it could constitute a selective default, a source familiar with the matter said on Wednesday.
The central bank has proposed that Lebanese holders of Eurobonds due in 2020 swap their holdings for longer-dated notes, a move that could ease pressure on dwindling foreign currency reserves amid a deep financial crisis.
In a letter to central bank governor Riad Salameh, caretaker Finance Minister Ali Hassan Khalil said the government needed to first decide how it would finance its bonds maturing in 2020, the source said.
One of the most heavily indebted countries in the world, Lebanon has $2.5 billion in Eurobonds due in 2020 including a $1.2 billion bond set to mature in March.
In the letter, Khalil recognised the central bank’s right to manage its own bond portfolio but asked that it hold off on the swap because of the potential implications for its sovereign rating, according to the source.
Salameh told Reuters on Wednesday that no swaps would go forward before the government takes a decision on it.
Lebanon has been without a government or economic rescue plan since Saad al-Hariri resigned as prime minister on Oct. 29, pushed out by sweeping protests against the ruling elite.
Salameh also asked for extra powers last week, saying he wanted to standardize banking controls. Commercial banks have individually imposed controls on hard currency, putting tight caps on dollar withdrawals and blocking most transfers abroad.
The Finance Ministry has asked Salameh to specify exactly what extra powers were being sought and on what legal basis, the source familiar with the matter said.
Reporting by Tom Perry and Laila Bassam Writing by Eric Knecht Editing by Mark Heinrich
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