(MENAFN- Khaleej Times) The Lebanese pound will stay stable in the coming months because it is backed by large foreign exchange reserves, the country's central bank governor Riad Salameh said yesterday.
He also said there were no plans to increase the percentage of reserves held in euros despite the weakness of the dollar because the U.S. currency plays a central role in the Lebanese economy.
"The Lebanese pound will stay stable and this position is based on the possibility in terms of reserves which are historically large," central banker Salameh said in an interview in French after a speech in Paris.
He said about a third of the country's foreign exchange reserves were held in euros with two thirds in U.S. dollars.
"Given the nature of the Lebanese markets we will stay with this proportion," he said.
Salameh also said interest rates would stay stable.
"We are predicting stability of interest rates, which could obviously react with the movement in international interest rates but the spread between interest rates in Lebanon and international interest rates will stay stable, at around 5 per cent," he said.
Lebanon has outstanding public debt that amounts to around 180 percent of gross domestic product.
Salameh said he hoped the country would be able to reduce this but it would depend on the pace of economic growth and the political situation as well as proceeds from privatisation.
Rival Lebanese leaders are trying to agree on a candidate to replace President Emile Lahoud in a step that would help end the country's worst political crisis since the 1975-1990 civil war.
He said last year's war between Israel and Hezbollah in Lebanon meant the economy would grow just 2 per cent this year.
The central bank has not yet made a forecast for 2008 but Salameh said the IMF was looking for growth of around 5 per cent depending on the political situation.
"It's not that we don't agree with that forecast but given that we know Lebanon and its stability we are trying to be careful," he said, adding that growth of 5 to 6 per cent in real terms would allow the state to start reducing its debt.
He said privatisations in the energy and telecoms sectors would accelerate as soon as the political situation improved.
"The government has made the telecoms sector a priority. They are hoping to be able to do it as of 2008," he said.
He also said Lebanon has a eurobond maturing in October and the government could tap the market with another bond to refinance the maturing one.
Further bond issues would depend on the budget, he added.
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