The Lebanese government decided to waive the entitlement to pay the foreign debt in a historical precedent, coinciding with Lebanon’s entry into a severe economic crisis.
Prime Minister Hassan Diab said that Lebanon will not pay the bonds due on Monday, 9 March, which will amount to $ 1.2 billion.
In a speech carried by local media, Diab added that the debt has become “too much for Lebanon to bear and greater for the Lebanese people to pay the interest.”
Lebanon has been suffering from the collapse of the Lebanese pound against the dollar for months. One of the reasons for this decline is the Lebanese banks placing strict restrictions on withdrawing amounts in foreign currency, which led to an increase in demand for dollars.
The dollar shortage crisis led to a rise in prices and the owners of small bank deposits were negatively affected by the decline in the value of the local currency.
Diab confirmed the government’s decision to enter into “equitable” negotiations with creditors, and to restructure the public debt “in a manner commensurate with Lebanon’s national interest.”
He added that 40 percent of the Lebanese people are threatened by poverty in light of one of the most severe crises that Lebanon has experienced.
The value of Lebanon’s total debt exceeds 80 billion dollars.
Lebanon witnessed unprecedented demonstrations in October in protest against the financial policies adopted by the ruling elite since the 1990s, in protest of the bad economic conditions and the high prices and unemployment, and the deterioration of basic services such as water, electricity and waste that were accumulated in the streets in 2015.
The protests, which were marred by clashes with the security forces, led to the resignation of the Saad Hariri government.
Prime Minister Hassan Diab, 61, was appointed to form the government in January.
With Lebanon remaining under the weight of huge debts, economists are advised to use the International Monetary Fund and undertake serious reforms as the only way out of the current crisis.