French President Emmanuel Macron said Lebanon's embattled leaders had pledged Tuesday to form a crisis cabinet within two weeks to push forward with key reforms, as he visited the disaster-hit country.&nbsp;

Macron is&nbsp;in Beirut for a second time since an August 4 explosion there which killed more than 180 people, laid waste to entire city districts and fuelled popular rage against the country's political elite.

He attended muted celebrations marking the centenary of Greater Lebanon, shortly after political leaders settled on a new prime minister, Mustapha Adib, to form a cabinet and lead the country out of political turmoil and an economic crisis that was already crippling the country before the portside blast.

Also read|&nbsp;<a href="https://www.wionews.com/world/macron-warns-lebanese-leaders-of-sanctions-if-reforms-are-not-swift-324479" hreflang="en">Macron warns Lebanese leaders of sanctions if reforms are not swift</a>

"What all political parties without exception have committed to this evening right here, is that the formation of this government will not take more than 15 days," he said.

Macron had set himself an ambitious goal for his return visit:&nbsp;to push for deep change, but without being seen as meddling in the former French mandate.

"This is the last chance for the Lebanese system," he warned earlier.

Also see|&nbsp;<a href="https://www.wionews.com/photos/timeline-from-devastating-beirut-blast-to-new-lebanese-government-324543" hreflang="en">Timeline: From devastating Beirut blast to new Lebanese government</a>

Macron spoke to the press after meeting top Lebanese politicians, while clashes erupted in central Beirut between security forces and protesters rejecting the new prime minister.

One held a poster aloft urging Macron: "Do not cooperate with the corrupt and criminal."

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New conferences&nbsp;

The French leader arrived Monday, just hours after Adib, a little-known 48-year-old academic and former ambassador to Germany, was designated to form a&nbsp;government.&nbsp;

Macron said it was not his place to "approve" the designation of Adib, whom he met late Monday and again on Tuesday.

The premier designate "has to be given all the tools to succeed... so he can implement reforms" long demanded by the international community, Macron said.

The Beirut explosion compounded Lebanon's worst economic crisis since the war, which has reached the point where the UN has warned that more than half of the population risk food shortages by the end of the year.

On August 9, international donors pledged over&nbsp;$300 million&nbsp;in emergency aid, during a video conference jointly organised by France and the United Nations.

Macron said he was ready to host a second Lebanon aid conference in the second half of October.

He added he had also invited the president, the prime minister and parliament speaker to a second political conference at the same time.

Macron had kicked off his trip not by visiting political leaders, but by spending more than an hour Monday with singing legend Fairuz, who at 85 is a rare unifying figure in Lebanon.

On Tuesday, Macron attended a series of events to mark 100 years since French mandate authorities proclaimed the creation of Greater Lebanon.

In the Jaj forest northeast of Beirut, he planted a cedar tree,&nbsp;Lebanon's national symbol, to express "confidence in the future of the country," his office said.

Macron also returned for a second visit to Beirut port, ground zero of the colossal blast.

French air force jets flew overhead, leaving trails of red, white and green smoke, the colours of the Lebanese flag.

Some on social media criticised the aerial manoeuvre, saying it could trigger traumatic memories among people who experienced the port blast and the 1975-1990 civil war.

Hezbollah has 'popular base'

Activists have blamed the country's entrenched political class for the August 4 explosion of hundreds of tonnes of ammonium nitrate after languishing unsafe in the port for years.

They have rejected the choice of Adib as premier, over being too close to established political circles.&nbsp;

On Tuesday, hundreds of protesters called for the proclamation of a secular state, to replace the multi-confessional country's sectarian power sharing system.

Clashes erupted in the evening, sparking condemnation from activists who denounced the police for beating protesters and alleged that French tear gas had been used.

Representatives of the powerful Shiite Muslim Hezbollah movement, designated by the US as a terrorist group, were among those who met Macron Tuesday.&nbsp;

Macron said Hezbollah, which is part of a bloc that has a majority in parliament, "is probably in parliament because of intimidation but also because other forces have failed to run the country well," but it also had a "popular base".

The issue of the disarmement of the group's military would eventually need to be broached, he said, though not immediately.

"This is exactly the discussion we had an hour ago... It should not be a taboo," he said.

French President Emmanuel Macron said Lebanon's embattled leaders had pledged Tuesday to form a crisis cabinet within two weeks to push forward with key reforms, as he visited the disaster-hit country.

French President Emmanuel Macron said Lebanon's embattled leaders had pledged Tuesday to form a crisis cabinet within two weeks to push forward with key reforms, as he visited the disaster-hit country. Macron is in Beirut for a second time since an August 4 explosion there which killed more than 180 people, laid waste to entire city districts and fuelled popular rage against the country's political elite. He attended muted celebrations marking the centenary of Greater Lebanon, shortly after political leaders settled on a new prime minister, Mustapha Adib, to form a cabinet and lead the country out of political turmoil and an economic crisis that was already crippling the country before the portside blast. Also read| Macron warns Lebanese leaders of sanctions if reforms are not swift "What all political parties without exception have committed to this evening right here, is that the formation of this government will not take more than 15 days," he said. Macron had set himself an ambitious goal for his return visit: to push for deep change, but without being seen as meddling in the former French mandate. "This is the last chance for the Lebanese system," he warned earlier. Also see| Timeline: From devastating Beirut blast to new Lebanese government Macron spoke to the press after meeting top Lebanese politicians, while clashes erupted in central Beirut between security forces and protesters rejecting the new prime minister. One held a poster aloft urging Macron: "Do not cooperate with the corrupt and criminal." New conferences The French leader arrived Monday, just hours after Adib, a little-known 48-year-old academic and former ambassador to Germany, was designated to form a government. Macron said it was not his place to "approve" the designation of Adib, whom he met late Monday and again on Tuesday. The premier designate "has to be given all the tools to succeed... so he can implement reforms" long demanded by the international community, Macron said. The Beirut explosion compounded Lebanon's worst economic crisis since the war, which has reached the point where the UN has warned that more than half of the population risk food shortages by the end of the year. On August 9, international donors pledged over $300 million in emergency aid, during a video conference jointly organised by France and the United Nations. Macron said he was ready to host a second Lebanon aid conference in the second half of October. He added he had also invited the president, the prime minister and parliament speaker to a second political conference at the same time. Macron had kicked off his trip not by visiting political leaders, but by spending more than an hour Monday with singing legend Fairuz, who at 85 is a rare unifying figure in Lebanon. On Tuesday, Macron attended a series of events to mark 100 years since French mandate authorities proclaimed the creation of Greater Lebanon. In the Jaj forest northeast of Beirut, he planted a cedar tree, Lebanon's national symbol, to express "confidence in the future of the country," his office said. Macron also returned for a second visit to Beirut port, ground zero of the colossal blast. French air force jets flew overhead, leaving trails of red, white and green smoke, the colours of the Lebanese flag. Some on social media criticised the aerial manoeuvre, saying it could trigger traumatic memories among people who experienced the port blast and the 1975-1990 civil war. Hezbollah has 'popular base' Activists have blamed the country's entrenched political class for the August 4 explosion of hundreds of tonnes of ammonium nitrate after languishing unsafe in the port for years. They have rejected the choice of Adib as premier, over being too close to established political circles. On Tuesday, hundreds of protesters called for the proclamation of a secular state, to replace the multi-confessional country's sectarian power sharing system. Clashes erupted in the evening, sparking condemnation from activists who denounced the police for beating protesters and alleged that French tear gas had been used. Representatives of the powerful Shiite Muslim Hezbollah movement, designated by the US as a terrorist group, were among those who met Macron Tuesday. Macron said Hezbollah, which is part of a bloc that has a majority in parliament, "is probably in parliament because of intimidation but also because other forces have failed to run the country well," but it also had a "popular base". The issue of the disarmement of the group's military would eventually need to be broached, he said, though not immediately. "This is exactly the discussion we had an hour ago... It should not be a taboo," he said.

Lebanon leaders have promised cabinet within two weeks, says Macron

<a href="https://www.wionews.com/world/lebanons-new-pm-aims-to-form-government-within-six-weeks-report-269385">Lebanon's new government </a>faces huge upcoming debt repayments and a currency peg at breaking point, but it may already have run out of the hard cash firepower it needs to tackle these problems.

The heavily indebted country faces hefty bond repayments coming up in March and April when $1.34 billion and $842 million of interest and principal respectively come due.

Analysts expect the <a href="https://www.wionews.com/business-economy/sanctions-hit-lebanese-bank-denies-hezbollah-ties-246636">central bank</a> to be able to foot the bill, for now, though some in Beirut believe a rescheduling or restructuring is preferable.

But as policymakers cling to the currency peg and with dollar flows have dried up, the question of how much ammunition the central bank has left has become ever more pertinent.

Some analysts calculate that the country's foreign currency reserves could be negative in real terms.

"In a crisis, there's no definition of what's usable," said Nafez Zouk at Oxford Economics. "If you have to defend the peg, what's usable and what's not usable changes, and you will have to touch the reserves held by banks at the central bank."

Lebanon's financial system has a complicated profile, with diaspora dollars attracted by high-interest rates forming a major source of hard cash and local banks holding large amounts of external hard currency bonds.

Officially, the country had foreign currency reserves of $31.5 billion at the end of December. The International Monetary Fund calculated that Lebanon had more than 11 months' worth of import cover - a level deemed ample by many measures.

But how large is the war chest in reality? Morgan Stanley calculates the current level of net reserves - or gross foreign currency holdings minus banks' mandatory reserves together with the country's own holdings - at $11.5 billion as of the end of 2019.

"Estimates of BDL's (Banque du Liban) usable reserves were wide-ranging, given the complex linkage between BDL and the domestic banks," Morgan Stanley strategist Jaiparan S Khurana wrote in a recent note to clients. Khurana also acknowledged that some calculations of reserves could end up with a negative number.

The fact that the central bank owes $67 billion to commercial banks would also turn the reserves number negative, said <a href="https://www.wionews.com/india-news/survey-reveals-three-of-worlds-top-10-fastest-growing-cities-are-from-kerala-275133">Oxford Economic</a>'s Zouk. And even some policymakers agree.

"In my opinion, the reserve has become negative," outgoing economy minister&nbsp;Mansour Bteish said in an interview.

British estimates the shortfall between the central bank's liabilities to commercial banks - or hard currency deposits parked by lenders at the bank - and its own reserves at around $40 billion.

The c also holds $13.9 billion of gold and $5.7 billion of government holdings of dollar bonds.

While selling large quantities of gold is not that easy, countries under pressure such as Venezuela have mobilised their gold stacks as collateral for swap operations to gain access to hard currency.

Yet Zouk points out that Lebanon using its gold could be tricky as parliamentary approval is needed to do so and domestic public opinion is strongly against such a move.

And while it is unusual for a country's central bank and lenders to hold the foreign-denominated debt of their own sovereign, this could be a mitigating factor in the big debt repayments falling due soon, some analysts said.

Lebanon faces interest and principal payments of nearly $4.4 billion in all in 2020.

"Considering the foreign ownership is now 45 per cent, the net impact on the BDL's foreign reserve position from these payments will be smaller than what the headline number would suggest," Morgan Stanley's Khurana said.

While official data show that foreign currency reserves have held up better than many expected in recent months, trends in dollar flows the grease that has kept Lebanon's financial engine running for years - are a cause for concern, said JP Morgan.

"While capital controls helped keep resident FX deposits unchanged, non-resident FX deposits decreased by $2.1 billion as of end-November alone and total 2019 deposit outflows amounted to $12 billion as of end-November," JP&nbsp;Morgan analysts wrote in a note.

Beirut appears to be running out of road fast, said Oxford Economics' Zouk. He calculates that Beirut will honour its upcoming debt payments while leaving capital controls in place but that it will lack new dollar inflows while having to manage a current account deficit including a 30% per cent compression of imports and additional foreign currency leakage of $2 billion a month.

"Add all these up, and reserves are gone by September."

Lebanon's new government faces huge upcoming debt repayments and a currency peg at breaking point, but it may already have run out of the hard cash firepower it needs to tackle these problems.

Lebanon's new government faces huge upcoming debt repayments and a currency peg at breaking point, but it may already have run out of the hard cash firepower it needs to tackle these problems. The heavily indebted country faces hefty bond repayments coming up in March and April when $1.34 billion and $842 million of interest and principal respectively come due. Analysts expect the central bank to be able to foot the bill, for now, though some in Beirut believe a rescheduling or restructuring is preferable. But as policymakers cling to the currency peg and with dollar flows have dried up, the question of how much ammunition the central bank has left has become ever more pertinent. Some analysts calculate that the country's foreign currency reserves could be negative in real terms. "In a crisis, there's no definition of what's usable," said Nafez Zouk at Oxford Economics. "If you have to defend the peg, what's usable and what's not usable changes, and you will have to touch the reserves held by banks at the central bank." Lebanon's financial system has a complicated profile, with diaspora dollars attracted by high-interest rates forming a major source of hard cash and local banks holding large amounts of external hard currency bonds. Officially, the country had foreign currency reserves of $31.5 billion at the end of December. The International Monetary Fund calculated that Lebanon had more than 11 months' worth of import cover - a level deemed ample by many measures. But how large is the war chest in reality? Morgan Stanley calculates the current level of net reserves - or gross foreign currency holdings minus banks' mandatory reserves together with the country's own holdings - at $11.5 billion as of the end of 2019. "Estimates of BDL's (Banque du Liban) usable reserves were wide-ranging, given the complex linkage between BDL and the domestic banks," Morgan Stanley strategist Jaiparan S Khurana wrote in a recent note to clients. Khurana also acknowledged that some calculations of reserves could end up with a negative number. The fact that the central bank owes $67 billion to commercial banks would also turn the reserves number negative, said Oxford Economic's Zouk. And even some policymakers agree. "In my opinion, the reserve has become negative," outgoing economy minister Mansour Bteish said in an interview. British estimates the shortfall between the central bank's liabilities to commercial banks - or hard currency deposits parked by lenders at the bank - and its own reserves at around $40 billion. The c also holds $13.9 billion of gold and $5.7 billion of government holdings of dollar bonds. While selling large quantities of gold is not that easy, countries under pressure such as Venezuela have mobilised their gold stacks as collateral for swap operations to gain access to hard currency. Yet Zouk points out that Lebanon using its gold could be tricky as parliamentary approval is needed to do so and domestic public opinion is strongly against such a move. And while it is unusual for a country's central bank and lenders to hold the foreign-denominated debt of their own sovereign, this could be a mitigating factor in the big debt repayments falling due soon, some analysts said. Lebanon faces interest and principal payments of nearly $4.4 billion in all in 2020. "Considering the foreign ownership is now 45 per cent, the net impact on the BDL's foreign reserve position from these payments will be smaller than what the headline number would suggest," Morgan Stanley's Khurana said. While official data show that foreign currency reserves have held up better than many expected in recent months, trends in dollar flows the grease that has kept Lebanon's financial engine running for years - are a cause for concern, said JP Morgan. "While capital controls helped keep resident FX deposits unchanged, non-resident FX deposits decreased by $2.1 billion as of end-November alone and total 2019 deposit outflows amounted to $12 billion as of end-November," JP Morgan analysts wrote in a note. Beirut appears to be running out of road fast, said Oxford Economics' Zouk. He calculates that Beirut will honour its upcoming debt payments while leaving capital controls in place but that it will lack new dollar inflows while having to manage a current account deficit including a 30% per cent compression of imports and additional foreign currency leakage of $2 billion a month. "Add all these up, and reserves are gone by September."

Lebanon's new government may have little reserves left to stabilise economy

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Lebanon leaders have promised cabinet within two weeks, says Macron

Lebanon's new government may have little reserves left to stabilise economy