US in talks with Lebanon’s new government to help stave off financial crisis

Country needs aid to help pay for food, fuel and medicine

An anti-government protester holds a Lebanese flag during clashes with riot police in Beirut, Lebanon. Getty Images

Anti government protesters and riot police clash during a second day of violence. Getty Images

Special forces police advance as they push back the anti-government protesters in downtown Beirut. AP Photo

An anti-government protester covered by the smoke of the tear gas, sits in the middle of a street. AP Photo

Special forces police are illuminated by laser pointers from anti-government protesters. AP Photo

A window shop smashed by anti-government protesters is seen during a protest against the new government, in downtown Beirut. AP Photo

Men pass in front of a coffee shop that was smashed by anti-government protesters. AP Photo

A Lebanese anti-government protester hurls stones at riot police. AFP

Riot police forces block a road leading to the parliament during clashes with anti-government protesters. AFP

Riot police chase an anti-government protester. AFP

Riot police detain an anti-government protester. AFP

Teargas engulfs Red Cross medics as anti government protesters and riot police clash during a second day of violence. Getty Images

Army soldiers deploy on a street where anti-government protesters clash with riot police. AP Photo

An anti government protester fires fireworks at riot police as they clash during a second day of violence. Getty Images

Smoke rises as Lebanese army soldiers walk during a protest against the newly formed government in Beirut. Reuters

The US said on Thursday that it was in discussions with the new government in Lebanon, which is quickly running out of money to pay for basics such as food, fuel and medicine as its citizens protest against corruption and a lack of economic opportunities.

Incoming Prime Minister Hassan Diab said this week that his country was facing a financial, economic and social "catastrophe".

Washington has imposed sanctions on Iran-backed Hezbollah officials and demanded that the new government meet protesters’ aspirations for real reform.

But the US said it was in discussions with Lebanon over its current cash shortage.

“We are monitoring the situation carefully and we are speaking with the government about various different economic alternatives,” Steve Mnuchin, Secretary of the Treasury said on Thursday in Davos, during the World Economic Forum annual meeting.

“There is obviously a lot of activity in the Middle East going on."

Tensions between the US and Iran have been running even higher since the killing of Quds Force commander Qassem Suleimani in Baghdad this month.

Lebanon has a growing deficit of more than $86 billion (Dh316bn) and is at the risk of default. The Lebanese pound has depreciated by about 40 per cent since protests started in October.

Local reports said this week that medicine and hospital supplies were starting to run short, as fuel did in December.

A joint statement from the International Support Group in Lebanon called on the international community to ensure continued support for Lebanon in addressing the security, economic, and humanitarian challenges facing the country.

"The ISG reaffirms the need for internal stability and the right for peaceful protest to be protected," the statement added.

The UN agency urged the new Lebanese government to quickly adopt "a ministerial statement with the necessary substantial, credible and comprehensive policy package of measures and reforms that can address the demands of the Lebanese people".

It said a "timely and decisive implementation" would be crucial in stopping and reversing the deepening crises facing the country.

New Finance Minister Ghazi Wazni said on Thursday that the country needed to secure between $4 billion and $5 billion in soft loans from international donors to pay for a year's wheat, fuel and medicine, Reuters said, quoting Lebanese newspaper The Daily Star.

Mr Wazni, named in the new cabinet formed on Tuesday, said financing would also help to stop a run on the dollar.

On Wednesday, US Secretary of State Mike Pompeo offered his support to Mr Diab's government if it undertook major reforms.

Mr Pompeo said the protests in the country went beyond the economic crisis and were seeking “sovereignty and freedom", as they were in Iraq.

He said they were also against Hezbollah, whose allies make up most of the support behind the Diab government.

Lebanon is still hoping that it can unlock $11bn in loan pledges made at the Cedar donor conference in France last year.