Eurobond payments
have been suspended

Talks with Ashmore and

Fidelity already underway

The government has declared that it will suspend payments on its debt obligations coming to term in 2020. It is the first time in its history.

"The debt has become bigger than Lebanon can bear, and bigger than the ability of the Lebanese to meet payments," said Prime Minister Hassan Diab.

Diab said that negotiations to restructure the country’s debt would continue “with all creditors, in a manner consistent with the national interest, by holding fair, well-intentioned negotiations with all lenders.” He said a default was the only way to stop foreign currency reserves from depleting. “How could we pay creditors while the people are unable to access their own money in their bank accounts?” Diab said.

The Prime Minister said debt restructuring is part of a wider economic rescue plan that seeks to cut state spending and save more than $350 million annually. He said downsizing the banking sector is part of the reform plan. He pledged to protect bank deposits, especially those of small depositors.

He assured foreign donors of the country’s commitment to reforms pledged at the CEDRE conference held in Paris in April 2018.

UN Secretary-General`s Representative Yan Kobish said: “The frank talk of the Prime Minister about the failure of the previous economic model opens the door for an exit from the crisis. I encourage creditors to work with the government to avoid a disorderly default.”

The Association of Banks said that it is willing to support all government choices for restructuring, except those concerning default.

The government has already started talks with Ashmore and Fidelity, the two largest foreign holders of Lebanese Eurobonds. Formal negotiations on debt restructuring with bondholders are expected to start in approximately two weeks.

The government is still weeks away from announcing a master plan to restructure the economy.