By Laila Bassam and Maya Gebeily
BEIRUT (Reuters) – Lebanese officials hope to meet international bondholders to talk about restructuring debt in the next 12 months but are not planning any meetings at the World Bank/IMF Spring meetings next week, finance minister Yassin Jaber said on Tuesday.
Jaber spoke to Reuters just days before travelling to Washington for the Spring meetings – one of the biggest gatherings for financial policy makers and investors – where Lebanon will seek to show it has made progress on economic reforms to address the underlying causes of its financial crash.
Lebanon’s economy began unravelling in 2019 after years of corruption and profligate spending by the country’s ruling elite, and tipped into a sovereign default on its $31 billion of outstanding international bonds in March 2020.
Asked whether he planned to meet international bondholders in the next year, Jaber said, “definitely, definitely, this is as they say the elephant in the room.”
“You can’t escape it in the end. Lebanon is keen to resolve this issue, God willing,” he said.
But the country needed to make progress on reforms – including reforming the banking sector and boosting government revenues through reforms to tax systems and customs collection – before it could start talks, Jaber said.
“We wanted, first of all, to do our homework, to put the whole reform process on the right track to get started. You can’t have a house in total disorder and then say, ‘I want to negotiate,'” he said.
The Lebanese delegation to the spring meetings will be the first outing at an IMF/World Bank meeting for Lebanon’s new government, which took the reins in February and pledged to seek a new IMF programme. Jaber said it would be the first time a Lebanese finance minister attends in more than a decade.
Economy Minister Amer Bisat is scheduled to give an outlook on Lebanon’s economy at a JPMorgan investor conference held on the sidelines, according to documents seen by Reuters.
The creditor group – which includes the heavyweight funds Amundi, Ashmore, BlackRock, BlueBay, Fidelity and T-Rowe Price as well as a group of smaller hedge funds – has recently appointed a financial advisor in preparation for debt talks.
Shortly after the bondholder group originally formed in 2021, it said it held a “blocking stake” of more than 25% across a number of Lebanon’s bonds, making it a critical player in any debt restructuring.
The chunk of the bonds are also held by domestic commercial banks or the Lebanese central bank, which bought $3 billion of debt directly from a previous government in 2019.
Lebanon’s bonds trade at deeply distressed levels of around 15-16 cents in the dollar. However, that is a sharp uptick from the single digits they traded in before Israel’s military campaign badly weakened Lebanese armed group Hezbollah, long viewed as an obstacle to overcoming Lebanon’s political paralysis.
In January, Lebanon’s cabinet extended the statute of limitations on legal action over Eurobonds for another three years. Jaber said the move “reassured the bondholders”.
He declined to comment on whether the government would seek haircuts, extensions or write-offs on the debt, saying the first focus was on reforms.
Jaber said Lebanon’s central bank governor was exploring different approaches to addressing the country’s financial losses, estimated to be around $84 billion.
The government was not at this stage considering liquidating its gold reserves, which were estimated in April 2022 at 286 tonnes and whose value has increased due to record high prices this year.
(Reporting by Laila Bassam and Maya Gebeily; Editing by Karin Strohecker and Susan Fenton)
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