Lebanon’s
top leadership opposes repaying the country’s sovereign debt, the
presidency said on Saturday, indicating the the heavily indebted state
is heading towards a default as it grapples with a major financial
crisis.
A default on Lebanon’s foreign currency debt will mark
a new phase in the crisis that has hammered Lebanon’s economy since October, slicing around 40% off the value of the local currency and leading banks to deny savers full access to deposits.
Lebanon has a $1.2 billion Eurobond due on March 9, part of a wider
portfolio of some $31 billion in dollar bonds that sources told Reuters
on Friday the government would seek to restructure in negotiations with
its creditors.
Prime Minister Hassan Diab will address the
Eurobond issue and Lebanon’s wider economic crisis in a speech to the
nation at 6:30 p.m. (1630 GMT).
A bank’s windows are smashed by protesters in Beirut, Lebanon, on Jan. 15, 2020.
Bilal Jawich | Xinhua News Agency | Getty Images
The announcement from the presidency followed a meeting attended by
the president, prime minister, parliament speaker, central bank governor
and head of the country’s banking association.
“The
attendees decided unanimously to stand by the government in any choice
it makes in terms of managing the debt, except paying the debt
maturities,” the presidency said in a statement after the meeting.
Sources told Reuters on Friday Lebanon was set to announce on
Saturday that it cannot make upcoming dollar bond payments and wants to
restructure $31 billion of foreign currency debt unless a last-minute
deal with creditors could be found to avoid a disorderly default.
Lebanon hired U.S. investment bank Lazard and law firm Cleary
Gottlieb Steen & Hamilton LLP last week as advisers on the widely
expected restructuring.
The financial crisis came
to a head last year as capital inflows slowed and protests erupted over
state corruption and bad governance.
The import-dependent
economy has shed jobs and inflation has risen as the pound has slumped,
adding to grievances that have fueled protests.
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