Lebanon’s central bank, Banque du Liban (BDL), is at it again. On 7 May as the country awaited results from the first parliamentary election in nine years, BDL Governor Riad Salameh confirmed plans to execute a debt swap arrangement under which the BDL would acquire $5.5bn of newly-issued Eurobonds from the Ministry of Finance in exchange for LL8,250bn ($5.5bn) worth of Lebanese treasury bills held by the BDL.

The deal, which was executed 19 May, essentially amounts to financial trickery in which the ministry gains access to $5.5bn worth of dollar-denominated Eurobonds capable of covering some refinancing needs, meaning the treasury can save $1.4bn in debt servicing costs this year. Since the Lebanese pound is pegged to the dollar at LL1,507.5 to $1, the BDL does not deplete its reserves while at the same time freeing up foreign currency for the finance ministry. (CONTINUED - 921 WORDS)