Defaulting on Eurobond debt will ruin Lebanon’s reputation: Expert

Lebanese Prime Minister Hassan Diab and officials meet with a team of IMF experts at the government palace in Beirut, Lebanon. (Reuters)

Lebanon defaulting on its $1.2 billion Eurobond maturities will not only give the country a bad reputation, it would also send a message that the government is not serious on reforms, independent financial market strategist and professor at the Lebanese American University Jihad El Hokayem said.

Dealing with a crippling financial crisis, heavily indebted Lebanon must decide whether to pay or default on its $1.2 billion Eurobond debt due on March 9. Lebanese officials are currently in talks with the IMF.

“Not only it will ruin the reputation of the country and send a message to the international community, but we need the international community for investing later on in Lebanon in privatization projects and for future funding. It will send a message to the investors who we need to invest in the country for reforms and privatization,” El Hokayem said.

The country’s banking association urged Lebanese President Michel Aoun on Thursday to find a quick resolution to the fast-approaching Eurobond maturities, saying falling bond prices were creating losses and piling pressure on banks.

For his part, Lebanese Parliament Speaker Nabih Berri said that debt restructuring was the “ideal” solution. The head of the Amal Movement group and an ally of Hezbollah, Berri’s economic adviser Ghazi Wazni was named finance minister in Prime Minister Hassan Diab’s new cabinet.

Expert El Hokayem said that should the Lebanese government default, it would put increased pressure on citizens' ability to get their money back, as bank assets would be slashed by up to 50 percent.

“The banks have a big part of their assets in treasury bills at the moment. If Lebanon defaults, the value of assets will decrease in a massive way,” he said.

Read more: IMF may call on Lebanon to cut public wages, alter peg: Experts

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Last Update: Wednesday, 20 May 2020 KSA 10:05 - GMT 07:05
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