BEIRUT: Lebanon’s finance minister said Thursday that its new government is weighing whether to pay or default on its $1.2 billion Eurobond maturing next month, amid an economic crisis that has sparked months of unrest.
Lebanon is facing a deepening liquidity crunch and a soaring public debt. Lebanese banks raised interests rates in a bid to attract foreign investments — but now the influx of foreign currencies has dried up and the Central Bank’s foreign currency reserves are shrinking.
“It is not easy,” Ghazi Wazni told reporters before the new Cabinet’s first meeting. He was speaking after reviewing different options with the government’s financial team.
“This is an important decision for the country, depositors, banks, the economic sector and international institutions,” he said, adding that the search for the “right decision” was ongoing.
The new government, headed by Prime Minister Hassan Diab, was voted into office earlier this week by Parliament and is facing snowballing political and economic crises.
On Wednesday, the International Monetary Fund said that Lebanese authorities had requested its technical advice on macroeconomic issues facing the country.
“IMF stands ready to assist Lebanon,” Gerry Rice, IMF spokesman tweeted Wednesday. “Any decisions on debt are the authorities’, to be made in consultation with their own legal and financial advisers.”
The government is widely expected to form a new committee to deal with the vexing financial crisis, which is the worst since the end of the 1975-1990 Lebanese civil war. But the most immediate question is what to do about a $1.2 billion Eurobond that matures on March 9: default or pay?
Lebanon has never defaulted on its debts. Defaulting could be very costly to the national economy and banking system, which until the recent financial crisis, was one of Lebanon’s most profitable and reputable sectors.