Formal debt restructuring talks between Lebanon and its bond holders are expected to begin in about two weeks, a source familiar with matter said on Sunday, after the heavily indebted state declared it could not meet its debt repayments.
Lebanon announced on Saturday it could not meet its debt payments, which include a $1.2 billion eurobond maturing on Monday, setting the state on course for a sovereign debt default as it grapples with a major financial crisis.
“How can we make outside payments when there are people who cannot even afford bread,” Prime Minister Hassan Diab said following a Cabinet session held at the presidential palace following last night's decision.
Read more: Lebanon will not pay upcoming bond maturities to provide citizens’ ‘basic needs’
The country has been in the grips of economic crisis since mid-October, and the decision to not pay back its eurobond maturities now means Lebanon is in uncharted territory. This is the worst economic downturn in Lebanon since the 1975-1990 civil war.
Lebanese have struggled to access their bank accounts and cash as the country also faces a liquidity crunch. As the eurobond is held predominantly by local commercial banks, questions remain as to the deleterious impact this will have on an already tough situation.
- with Reuters