People celebrate after Lebanon’s army chief Joseph Aoun was selected as Lebanon’s president in the town of Klayaa, southern Lebanon, January 9, 2025. REUTERS/ Karamallah Daher
LONDON- Lebanese government bonds extended their three-month-long rally on Thursday as the crisis-ravaged country’s parliament voted in a new head of state for the first time since 2022.
Lebanese lawmakers elected army chief Joseph Aoun as president. It came after 12 failed previous attempts to pick a president and boosted hopes that the country might finally be able to start addressing its dire economic woes.
Its battered international bonds have almost trebled in value since September, when the regional conflict with Israel weakened Lebanese armed group Hezbollah, long viewed as an obstacle to overcoming its political paralysis.
Those bonds, which have been in default since 2020, rallied shortly after Aoun’s victory was announced and stood around 1.3 cents higher on the day at just over 16 cents on the dollar as local trading wound down. , ,
One bondholder described Aoun’s election as “a very positive development” in the broader context of the ceasefire with Israel, the downfall of Bashar al-Assad in Syria and strong support for Lebanon both regionally and internationally.
“We expect the government formation to be relatively quick so they can start to work on reforms towards a deal with the IMF and banking sector restructuring,” said Ted Pincus at Switzerland-based fund Mangart
With economic support from Saudi Arabia, UAE, France, the United States and others also on the table, “Lebanon’s future now looks a lot brighter,” he added.
ROAD TO RECOVERY
Lebanon’s bonds have risen steadily in recent months, although they remain some of the lowest-priced government bonds in the world, reflecting the scale of its difficulties.
With an economy and financial system still reeling from a collapse in 2019, Beirut is in dire need of international support to rebuild from the recent conflict, which the World Bank estimates to have cost the country $8.5 billion.
Hasnain Malik, an analyst at financial research firm Tellimer, said Aoun’s victory was “the first necessary step on a very long road to recovery”.
Aoun now needs to appoint a prime minister and assemble a cabinet that can retain the support of parliament, resuscitate long-delayed reforms and help Lebanon secure international financial support.
On the downside, the voting process demonstrated that despite its weakened military capability, Hezbollah remains a key political force.
The 61-year-old Aoun fell short of the required support in Thursday’s first round of parliamentary voting and only succeeded in a second round, reportedly after a meeting with Hezbollah and Amal party MPs.
“That presents significant ongoing risk to any new PM and cabinet, which need to maintain the confidence of a majority of parliament,” Malik said.
(Reuters)