After seeing its foreign currency reserve plunge to an all-time low, Lebanon failed to repay a $1.2-billion Eurobond that was due on 9 March.
It was the first time Lebanon has defaulted on a foreign debt.
The Banque du Liban, Lebanon’s central bank, reports it has about $29 billion in foreign currency. Ratings agency Fitch estimates it owes almost twice that to overseas creditors.
But usable foreign currency is no more than $4 billion. The rest is on deposit from commercial banks or is already pledged to the country’s banks to help them cover their commitments to foreign partners.
Sami Atallah, director of the Lebanese Centre for Policy Studies, said it would be “suicidal” for Lebanon to pay foreign creditors when government finances are in such bad condition. Atallah said, “The banks have been depleted or are bankrupt.”
Last October, lenders set strictures on bank accounts that bans sending funds abroad and restricts cash withdrawals to as little as $200 every two weeks.
“How can we pay foreign creditors when the Lebanese can’t access their deposits?” said prime minister Hassan Diab in an address to the nation. He also announced a restructuring of the nation’s banking sector.
Attempting to quell fears that depositors will lose their money or be forced to bail out banks, Hassan said his government will “endeavor to protect” them.
Lebanon’s government debt is about $90 billion, or 170 percent of the country’s GDP.
TRENDPOST: We have been reporting on the Lebanese demonstrations that erupted last October as citizens took to the streets protesting income inequality, government corruption, and the lack of basic living standards.
One of our 2020 Top Trends was “New World Disorder,” as demonstrators around the world were rallying against establishment governments and fighting for basic living standards.
Since the outbreak of COVID-19, from Hong Kong to South Africa, many governments have effectively banned protests by forbidding more than a small number of people to gather.
