Lebanese Ministry of Information
The Finance Ministry announced on Monday that Lebanon is going to “suspend” payments on all its Eurobond in foreign currency after defaulting on its $1.2 billion March 9 debt to safeguard dwindling foreign currency reserves.
The Ministry said in an English-language statement released today:
“On March 7, 2020, Lebanon announced its decision to suspend the payment of $1.2 billion worth of bonds due on March 9, 2020 at a rate of 6.375% in order to protect its foreign currency reserves. In furtherance of this goal, and given the increasing difficulty to access foreign currencies, the government has decided to discontinue payments on all of its outstanding US$-denominated Eurobonds.
The government is going to take all measures it deems necessary to manage Lebanon’s limited foreign exchange reserves wisely and cautiously.
The government remains firmly committed to its three-pronged initiative on economic reform and is in the process of developing a sustainable macroeconomic plan to correct the status of the Lebanese economy.
The government intends to hold good faith talks with its creditors as soon as is practicable. To this end, the Ministry of Finance plans to make an Investor Presentation to investors on March 27, 2020.
Instructions have been given to Lebanon’s financial advisors, Lazard Frères, to initiate appropriate arrangements under the current circumstances to facilitate these talks.
Information to creditors will be published regularly on the website of the Lebanese Ministry of Finance.”
The government must now reach a decision on whether to ask for a bailout from the International Monetary Fund, which has so far only provided Lebanon with technical assistance to deal with its financial crisis.
Banking experts have argued in favor of an IMF rescue plan, saying it would provide the kind of assurances creditors are looking for in restructuring negotiations.
But some officials are concerned that such assistance would involve an austerity package, which may provide new fuel to a street protest movement that has shaken Lebanon since October.
Lebanon’s powerful Hizbullah, which has been the main opponent of an IMF bailout, said this month it could accept help from the world body under “reasonable conditions.”
One of the most indebted countries in the world, the small Mediterranean country had never defaulted before this month.
But with foreign reserves plummeting amid a slowdown in foreign currency injections, officials have said they have no other choice but to restructure the country’s debt.
Earlier this month, Finance Minister Ghazi Wazni said the country’s foreign reserves stood at a little more than $20 billion.
Naharnet
