August 13, 2020

Lebanon declares first debt default of its history in the midst of a major crisis



The Lebanese government on Saturday declared its first debt default in the country’s history by deciding that it will not disburse 1.2 billion dollars in Eurobonds, whose payment due is fulfilled in two days, in the middle of one of the worst economic crises in decades.

The Lebanese Prime Minister, Hasan Diab, said today in a speech to the nation that the country’s foreign exchange reserve has reached “a critical and dangerous level, which leads the Lebanese Republic to suspend the payment of the 9 Eurobonds March as these funds should be used to guarantee the basic needs of the Lebanese people. “

Diab said that “the total public debt exceeded 90,000 million dollars,” that is, more than 170% of its gross domestic product (GDP), which means that it is at the head of the world’s most indebted, at one time in which the Mediterranean country is experiencing a wave of unprecedented protests and a shortage of liquidity.

In his 20-minute speech, the prime minister said that “more than 40% of the population will soon be below the poverty line.”

“The debt has become greater than the capacity that Lebanon can bear, and greater than the ability of the Lebanese to pay its benefits,” said the head of the Government, who has held the position since last December.

Diab hinted that “corruption and spending have exhausted the State (…) Corruption was initially shy, then became bold and then rude, until it became immoral and an important part of the components of the state, the power and society. ”

Precisely, the corruption of the ruling class for decades propelled that on October 17 thousands of people took to the streets throughout the country in protests that still continue.

This Saturday, hundreds of people have also left in marches throughout the country and have concentrated in front of the banks, the main objective of these marches.

Banking entities have imposed their own capital control in the absence of a regulation by the Lebanese Central Bank, causing banks not to withdraw more than $ 300 every fifteen days, in a heavily dollarized economy, and a devaluation of the Lebanese pound, their local currency.

Given this, Diab announced that the Government will develop a plan to restructure the banking sector: “We do not need a banking sector that is four times the size of our economy,” he said.

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