December 19, 2018 / 1:37 PM / a month ago

Lebanon's finance minister to stay as cabinet edges closer - sources

BEIRUT (Reuters) - Lebanon’s finance and foreign ministers will keep their posts in the new national unity government, sources said on Wednesday, with the country close to forming the cabinet after seven months of political wrangling.

FILE PHOTO: Lebanese Prime Minister-designate Saad al-Hariri speaks during a news conference in Beirut, Lebanon, November 13, 2018. REUTERS/Mohamed Azakir/File Photo

Efforts to form the government, led by Prime Minister-designate Saad al-Hariri, have been obstructed by conflicting demands for cabinet seats that must be parcelled out in line with a finely balanced, sectarian political system.

Heavily indebted and suffering from a stagnant economy, Lebanon is in dire need of an administration that can set about long-stalled reforms to put public debt on a sustainable footing.

Lebanese dollar-denominated bonds rose on progress towards the government formation, jumping to a five-week high.

The May 6 national election, Lebanon’s first in nine years, produced a parliament tilted in favour of the heavily armed, Iran-backed Shi’ite Muslim group Hezbollah, which together with its political allies won more than 70 of the 128 seats.

Hariri, who enjoys Western backing, lost more than one third of his lawmakers, though he remained Lebanon’s biggest Sunni Muslim leader and was nominated again as prime minister.

“We are on the brink of forming the government,” Parliament Speaker Nabih Berri, a political ally of Hezbollah, was quoted as saying by one of his MPs. Caretaker Foreign Minister Gebran Bassil said the remaining details should not need more than “two days ... and we will have a government”.

Ali Hassan Khalil, a top aide to Berri, will remain finance minister, a senior official and a senior political source told Reuters, speaking on condition of anonymity because the government had yet to be finalised and announced.

$11 BILLION PLEDGED

International institutions and donor states want to see the next government take long-delayed steps to put public debt on a sustainable path to unlock more than $11 billion of support, mostly loans, pledged in April to help revive the economy.

Lebanon has the world’s third highest debt as a proportion of GDP.

The sources said Bassil, the son-in-law of President Michel Aoun and head of the Free Patriotic Movement (FPM) he founded, would keep his job as foreign minister.

Aoun has been a political ally of Hezbollah since 2006 and, despite some differences, supports the group’s arsenal which he has said is needed to defend Lebanon from Israel.

Hezbollah is expected to name three ministers in the new government, one more than in the outgoing administration. One of these will be the health ministry, the most significant ministry the group would have controlled in any government.

Elias Bou Saab, also part of Aoun’s political bloc, would be the next defence minister, the senior political source said.

Lebanon’s army is a major recipient of U.S. aid, receiving more than $1.6 billion since 2006. The defence ministry in the outgoing cabinet was also held by an Aoun ally.

The interior ministry is expected to remain with Hariri’s Future Movement.

A U.S. State Department official said on Tuesday the United States hoped that next government would be willing to work with it “on areas of mutual interest” and expressed concern over Hezbollah’s rising political clout in the country.

Reporting by Laila Bassam, Ellen Francis and Tom Perry in Beirut, and Karin Strohecker in London; Editing by Jon Boyle, William Maclean

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