UPDATE 2-Lebanon cabinet approves financial rescue plan

Lebanon's government on Thursday approved a rescue plan to pull the country from its worst economic and financial crisis in decades, which must now win a vote of confidence in parliament.

A draft policy statement seen by Reuters on Sunday outlined broad plans, including reducing interest rates, recapitalising banks, restructuring the public sector and seeking support from foreign donors. The information minister said on Thursday that the cabinet had approved the plan with some amendments, which ministerial sources said were minor.

It was not immediately clear what changes were made to the 17-page statement, which is expected to be presented next week in parliament for the new government to secure a vote of confidence. Prime Minister Hassan Diab's cabinet was formed last month by the Iran-backed Hezbollah movement and its political allies, which hold a parliamentary majority.

The cabinet took office nearly three months after Saad al-Hariri's government resigned under pressure from sweeping protests against a ruling elite that oversaw decades of waste and corruption. Hezbollah's parliamentary bloc said on Thursday that decisions on the country's debt maturities in coming months would need national consensus.

"Radical (moves)...require a national decision and popular understanding," it said in a televised statement. Cash-strapped authorities are struggling to decide whether to repay a $1.2 billion Eurobond maturing in March, political and banking sources told Reuters this week.

Diab's government faces a liquidity crunch, shattered confidence in banks which have imposed informal controls, a weakened Lebanese pound and soaring inflation. "It is imperative to start work immediately to make up for lost time," President Michel Aoun's office quoted him as saying on Thursday. Finance Minister Ghazi Wazni will meet with a World Bank delegation on Friday, his office said.

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