Lebanon appears to be heading toward its first-ever default on paying back Eurobonds as the country struggles with its worst economic and financial crisis in decades, a top Lebanese official said.
In this photo released by the Lebanese Government, Lebanese President Michel Aoun, center, meets with Prime Minister Hassan Diab, right, and Parliament Speaker Nabih Berri, at the Presidential Palace in Baabda, east of Beirut, Lebanon, Saturday, March 7, 2020. Lebanon appears to be heading toward its first default in paying back Eurobonds worth $1.2 billion that mature in two days as the country passes through its worst economic and financial crisis in decades, a Lebanese official said Saturday.
The default marks a new chapter in the crisis and could have severe repercussions on the tiny country, risking legal action by lenders that could further aggravate and push Lebanon's economy toward financial collapse. The currency has already lost up to 60% of its value on the dollar on the black market and banks have imposed crippling capital controls on cash withdrawals and transfers.
Diab said Lebanon's foreign currency reserves"have reached a critical stage" leading the government to suspend its debt payment so that it can continue to provide basic commodities to the Lebanese people. In a 20-minute speech, Diab repeatedly pledged various measures to combat corruption and restructure Lebanon's banking sector. He referred to measures that would need to be taken, hinting at the possibility of raising taxes, but did not announce any immediate painful measures.“We will work to protect deposits in the banking sector, especially those of small depositors, which make up more than 90% of all bank accounts,” he said.
Louis Hobeika, professor of economics and finance at Notre Dame University, told The Associated Press that Lebanon “will enter crises in the near future that will not be easy to overcome because of accumulation of mismanagement and corruption over the past years."
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