Lebanon Prosecutor Interrogates Bankers Over Capital Flight

Lebanese withdraw money from ATMs in the capital Beirut after the country imposed restrictions on dollar withdrawals and transfers abroad in an attempt to conserve dwindling foreign currency reserves | AFP
Lebanese withdraw money from ATMs in the capital Beirut after the country imposed restrictions on dollar withdrawals and transfers abroad in an attempt to conserve dwindling foreign currency reserves | AFP
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Lebanon Prosecutor Interrogates Bankers Over Capital Flight

Lebanese withdraw money from ATMs in the capital Beirut after the country imposed restrictions on dollar withdrawals and transfers abroad in an attempt to conserve dwindling foreign currency reserves | AFP
Lebanese withdraw money from ATMs in the capital Beirut after the country imposed restrictions on dollar withdrawals and transfers abroad in an attempt to conserve dwindling foreign currency reserves | AFP

A Lebanese prosecutor Monday questioned bankers over more than 2 billion dollars in capital flight in past months despite strict banking restrictions in the crisis-hit country, judicial sources said.

Banks have since September imposed increasingly tight limits on dollar withdrawals and transfers abroad as part of measures to tackle a severe liquidity crisis.

But bankers stand accused of having sent millions of dollars abroad despite those limitations since mass anti-government protests erupted on October 17.

Lebanese banking association head Salim Sfeir, as well as representatives from 14 banks, appeared before financial prosecutor Ali Ibrahim, the sources said, AFP reported.

They testified "over the transfer abroad of 2.3 billion dollars during the two months since the start of the popular uprising", they said.

They were questioned over "the causes of the transfers abroad of the money of bank owners, which reduced liquidity in the internal financial markets".

They were also asked why other depositors were unable to make transfers abroad for trade or to pay tuition fees.

Bankers were asked to justify "the inability of depositors to withdraw from their US dollar accounts... while that restriction did not apply to the powerful".

Lebanon is currently facing its worst economic crisis since its 1975-1990 civil war.

The value of the Lebanese pound has plummeted on the black market, prices have risen, and many businesses have been forced to slash salaries, dismiss staff, or close.

Lebanon is one of the most indebted countries in the world, with a public debt equivalent to 150 percent of its GDP.

The country is now under pressure to pay a $1.2 billion Eurobond maturity on March 9.

Economists warn payment on time would eat away at plummeting foreign currency reserves, while bankers say a default would damage Lebanon's reputation with lenders.

Bank of America Merill Lynch in a November report estimated that around 50 percent of Eurobonds were held by local banks, while the central bank had around 11 percent.

Foreign investors owned the remainder or around 39 percent, it said.

But these figures may have changed, with local media reporting that local banks have recently sold a chunk of their Eurobonds to foreign lenders.

The judicial sources said those summoned on Monday were also asked about those sales.

According to AFP, representatives of other banks are to be called in later this week.



Saudi Arabia Raises $12 Billion in International Bonds Amid Strong Demand

Skyscrapers are seen in King Abdullah Financial District in the Saudi capital, Riyadh. (Reuters).
Skyscrapers are seen in King Abdullah Financial District in the Saudi capital, Riyadh. (Reuters).
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Saudi Arabia Raises $12 Billion in International Bonds Amid Strong Demand

Skyscrapers are seen in King Abdullah Financial District in the Saudi capital, Riyadh. (Reuters).
Skyscrapers are seen in King Abdullah Financial District in the Saudi capital, Riyadh. (Reuters).

Saudi Arabia has raised $12 billion from global debt markets in its first international bond issuance of the year, attracting bids worth nearly $37 billion. This demonstrates strong investor appetite for Saudi debt instruments.

The issuance comes just two days after the approval of the 2025 annual borrowing plan by Minister of Finance Mohammed Al-Jadaan. The plan estimates financing needs for the fiscal year at SAR 139 billion ($37 billion). The funds will be used to cover the projected SAR 101 billion ($26.8 billion) budget deficit for 2025, as well as repay SAR 38 billion ($10 billion) in principal debt obligations due this year.

The National Debt Management Center (NDMC) announced on Tuesday that the issuance includes three tranches: $5 billion in three-year bonds, $3 billion in six-year bonds, and $4 billion in ten-year bonds. Total demand for the bonds reached $37 billion, exceeding the issuance size by three times and reflecting robust investor interest.

The NDMC emphasized that this issuance aligns with its strategy to broaden the investor base and efficiently meet Saudi Arabia’s financing needs in global debt markets.

According to IFR, a fixed-income news service, the initial price guidance for the three-year bonds was set at 120 basis points above US Treasury yields. The six-year and ten-year bonds were priced at 130 and 140 basis points above the same benchmark, respectively.

Strong demand allowed Saudi Arabia to lower yields on the shorter-term bonds, further demonstrating investor confidence. Economists noted that the pricing above US Treasuries is attractive in the current market, showcasing trust in Saudi Arabia’s economic stability and financial strategies.

International confidence

Economic experts view this successful bond issuance as a testament to international confidence in Saudi Arabia’s robust economy and financial reforms. Dr. Mohammed Al-Qahtani, an economics professor at King Faisal University, said the move underscores Saudi Arabia’s commitment to diversifying financing tools both domestically and internationally. He added that the funds would support Vision 2030 projects, reduce pressure on domestic resources, and attract strong international investor interest.

The issuance strengthens Saudi Arabia’s ability to meet financial needs, expand its investor base, and establish a global financing network, he said, noting that it also facilitates entry into new markets, enabling the Kingdom to accelerate infrastructure projects and capital expenditures.

Dr. Ihsan Buhulaiga, founder of Joatha Business Development Consultants, described the 2025 budget as expansionary, aimed at meeting the financing needs of economic diversification programs. He stressed that the budget deficit is an “optional” one, reflecting a deliberate choice to prioritize Vision 2030 initiatives over immediate fiscal balance.

Buhulaiga explained that the Kingdom’s approach balances two options: limiting spending to available revenues, which would avoid deficits but delay Vision 2030 initiatives, or borrowing strategically to fund Vision 2030 goals. He said that the annual budget is just a component of the larger vision, which requires sustained funding until 2030.

He continued that Saudi Arabia’s fiscal space and creditworthiness allow it to borrow internationally at competitive rates, explaining that this flexibility ensures financial sustainability without compromising stability, even during challenges like the COVID-19 pandemic.

Saudi Arabia’s debt portfolio remains balanced, with two-thirds of its debt domestic and one-third external. As of Q3 2024, public debt stood at approximately SAR 1.2 trillion, below the 30% GDP ceiling. According to the Ministry of Finance, the budget deficit is expected to persist through 2027 but remain below 3% of GDP.

Buhulaiga highlighted the importance of capital expenditure, which reached SAR 186 billion in 2023 and is projected to rise to SAR 198 billion in 2024, a 6.5% increase.

He emphasized the government’s pivotal role in economic diversification, supported by investments from the Public Investment Fund (PIF), the National Development Fund, and its subsidiaries, including the Infrastructure Fund.

The PIF recently announced a $7 billion Murabaha credit facility, facilitated by Citigroup, Goldman Sachs International, and JPMorgan. Meanwhile, the NDMC arranged a $2.5 billion revolving credit facility earlier in January, compliant with Islamic principles, to address budgetary needs.

In November, Moody’s upgraded Saudi Arabia’s credit rating to Aa3, aligning with Fitch’s A+ rating, both with a stable outlook. S&P Global assigns the Kingdom an AA-1 rating with a positive outlook, reflecting a high ability to meet financial obligations with low credit risk.

The IMF estimates Saudi Arabia’s public debt-to-GDP ratio at 26.2% in 2024, describing it as low and sustainable. This is projected to rise to 35% by 2029 as foreign borrowing continues to play a key role in financing deficits.