Meeting on Saturday March 7 at the presidential palace, the Lebanese government decided on the repayment of its sovereign debt after weeks of negotiations. Prime Minister Hassan Diab announced in the aftermath that Lebanon was no longer able to honor its claims.

"Lebanon is unable to repay the debt maturities in the current circumstances," said Hassan Diab in a speech to the nation.

"Our foreign exchange reserves have reached a worrying level (...) pushing the Lebanese government to suspend (payment of a debt falling due) due March 9," he said, adding that the state would "restructure its debt in accordance with the national interest".

This default thus marks a new stage in the interminable political and financial crisis that the country is going through. For almost five months, an unprecedented protest movement has indeed taken place against a political class deemed incompetent and corrupt.

The main Lebanese leaders were opposed on Saturday to their country repaying its sovereign debt, according to the Lebanese presidency, paving the way for a default.

Over a billion Eurobonds to be reimbursed

On March 9, the Lebanese state is supposed to reimburse 1.2 billion Eurobonds, Treasury bills issued in dollars by the state, part of which is held by banks and the Central Bank.

Currently, Lebanon is crumbling under a debt of 92 billion dollars, or about 170% of its gross domestic product (GDP), according to the international agency Standard and Poor's (S&P), one of the highest ratios in the world.

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The Lebanese banks, which hold a large part of the public debt, had recently called on the State to avoid a default, which would deepen their lack of liquidity, particularly in dollars.

Fearing a depletion of their foreign currency reserves, banks have already imposed drastic restrictions in recent months, with several establishments capping withdrawals at $ 100 per week and prohibiting money transfers abroad.

Many voices have been raised in recent weeks to demand debt restructuring in order to give the government additional time to carry out far-reaching reforms to get the country back on track.

Deep debt

The country began to go into massive debt at the end of the civil war (1975-1990) to rebuild the country. But in the absence of reforms and good governance, the public deficit has continued to widen over the years and local banks have continued to buy treasury bonds.

As a result, public debt jumped from a few billion dollars in the early 1990s to more than 90 billion dollars.

A situation that angered the Lebanese, who marched through the streets of the country to denounce bad policies for the past three decades.

Read also: Violence in Lebanon: "We are not listened to when we demonstrate peacefully"

At the request of the state, an emergency mission from the International Monetary Fund (IMF) was dispatched last month but no financial assistance from the institution has yet been announced.

In April 2018, aid of $ 11.6 billion was promised at a conference sponsored by France, but funds have still not been released for lack of reforms.

With AFP and Reuters

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