Lebanon has a $52.5b hole to fill

These relate to deposits, including those in foreign currency

Crisis-wracked Lebanon has a lot more than just upcoming Eurobonds to worry about. In addition to $31 billion of those, the Middle Eastern nation’s central bank has $52.5 billion of obligations in the form of foreign currency deposits and certificates of deposit, according to analysts at Fitch Ratings Ltd.

The certificates of deposit total $20.9 billion and while few mature this year or next, more than $8 billion come due in 2022 and 2023, according to Fitch.

Adding to woes

Those are mostly owed to Lebanese banks and they add to the country’s woes as it faces its worst economic crisis in decades. They will also complicate a potential debt restructuring by the government, which has hired Lazard Ltd and Cleary Gottlieb Steen & Hamilton as financial advisers.

Falling reserves and inflows have led to a shortage of foreign exchange in Lebanon and caused havoc with its financial system. Moody’s, which downgraded the government’s debt to 10 steps below investment grade last week, said a default is “all but inevitable” in the near term.

An estimated $4.5 billion of the $31.6 billion of foreign currency deposits parked at the central bank mature this year, though most of those will probably be rolled over, Fitch said. Still, the central bank’s decision in December to pay half the interest on its foreign currency liabilities in Lebanese pounds points to rising stress, the analysts said.

Lebanon may choose to prioritise its reserves for Eurobond payments — with $1.2 billion of notes due on March 9 — and imports such as food rather than the central bank’s obligations. If so, that will force local banks to tighten the de facto capital controls they have had in place for months, Fitch said.