Confusion and fear hang over Lebanon as debt comes due | Samar Kadi

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BEIRUT — Apprehension and confusion have intensified as time is running out over impending Lebanese debt maturities of a $1.2 billion Eurobond due March 9. Failure to pay or payment of the debt is expected to aggravate the acute economic crisis hitting the country.

The government has studied, with the help of international financial experts, the options of orderly and non-ordered default and their implications and a third option — partial payment and negotiation of the remainder.

“Whether they pay or not, people as a whole will suffer the most and be totally helpless,” said Nada Sleiman, a craftswoman.

“Lebanon needs an economic salvation plan even if it fails because if we pay, there will be no money left to buy fuel, wheat, medicine and other essentials. In addition, people’s savings will be put at risk. Undoubtedly, the people will bear the brunt of any decision,” Sleiman said.

Some politicians have directed their criticisms at Lebanon’s banking sector, which survived unscathed the country’s devastating civil unrest (1975-1990) and wars with Israel.

Lebanese parliament speaker Nabih Berri of the Shiite Amal movement accused banks of diluting local holdings by selling their Eurobonds to foreign investors, weakening Lebanon’s position in talks with foreign bondholders.

Banks, which for years funneled deposits to the state, hold the bulk of sovereign debt and are at odds with political powers over the March repayment.

Bank of America Merrill Lynch in November estimated that about 50% of Eurobonds were held by local banks, while Lebanon’s central bank held about 11% and foreign investors owned the rest. However, those numbers may have changed after local banks reportedly sold some of their Eurobond holdings to foreign lenders.

Economists have warned that paying the March 9 Eurobond debt on time will eat away at Lebanon’s plummeting foreign currency reserves, while bankers say default will hurt the country’s reputation with lenders .

A decision by the financial prosecutor to freeze the assets of 20 Lebanese banks on March 5 was blocked almost immediately by the public prosecutor, who warned that “such a decision would plunge the country, as well as its monetary, financial and economic sectors in chaos”. .”

The government has separately approved a bill on the lifting of bank secrecy, which is at the heart of the Lebanese banking system. The move was described as a “significant achievement” to hold accountable anyone who is corrupt, including ministers, MPs and civil servants.

Public anger has boiled over in recent months against banks, which have severely restricted people’s access to their savings and blocked overseas transfers. The Lebanese pound has lost more than 30% of its value on the parallel market since September, reaching a peak of 2,600 pounds to the US dollar.

Financial tensions came to a head last year as capital inflows slowed and protests erupted against a political elite that has dominated Lebanon since the civil war and plunged it into crisis.

The crisis is rooted in decades of waste and corruption that have left the country with one of the biggest public debt burdens in the world.

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