Lebanon’s Central Bank to Continue Intervening in Bond Market

Lebanon’s central bank will continue intervening in the bond market after Standard & Poor’s downgraded the country’s rating earlier this month, Governor Riad Salameh said today.

The central bank “will continue to maintain the stability of interest rates through its continuous intervention in bond markets,” Salameh said in a speech in Beirut. The rating downgrade “hasn’t affected the financial markets negatively,” he said.

S&P cut Lebanon’s rating to B-, six levels below investment grade, from B on the impact of the Syrian civil war on the country’s economy. Lebanon, which has had no government for the past six months, has seen its debt-to-gross domestic product rise to 140 percent from 135 percent, Salameh said today.

The warring in Syria, which has killed at least 100,000 people since 2011 according to estimates quoted by the United Nations, has slowed Lebanon’s economic growth as security concerns battered tourism. The World Bank last month cut its forecast for economic growth this year to 1.5 percent from 2.3 percent. The Syrian conflict had so far cost the country an estimated $2.6 billion, the World Bank said.

Still, deposits into Lebanese banks are rising and may climb 7 percent this year, Salameh said. Deposits by non-residents may reach $8 billion in 2013, or 20 percent of GDP, Salameh said citing World Bank figures.

The central bank will offer lenders 1.2 trillion Lebanese pounds ($796 million) at an interest rate of 1 percent, Salameh said. The funds are intended to be used as credit to “productive sectors” in the country, he said.

To contact the reporters on this story: Donna Abu-Nasr in Dubai at dabunasr@bloomberg.net; Dana El Baltaji in Dubai at delbaltaji@bloomberg.net

To contact the editor responsible for this story: Andrew J. Barden at barden@bloomberg.net

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