U.N. Coordinator Encourages Creditors to Cooperate with Lebanese Govt.
U.N. Special Coordinator for Lebanon Jan Kubis on Sunday encouraged creditors to cooperate with the Lebanese government after the country announced that it will default on a Eurobond debt for the first time in its history amid a severe financial and economic crisis.
“Honest statement of PM Hassan Diab about the failure of the previous economic model opens the way out of the crisis,” Kubis said in a tweet.
“I encourage creditors to work with the government to avoid disorderly default following the suspension of the 9 March Eurobonds payment dictated by the critical situation of the country,” he added.
Diab announced Saturday that Lebanon “will seek to restructure its debts in a manner consistent with the national interest" through negotiations with creditors.
Diab said debt restructuring is part of a wider economic rescue plan that seeks to cut state spending and save more than $350 million annually.
The premier said Lebanon must now enter into debt restructuring negotiations, which "will take time, effort, and will require painful measures."
The default marks a new chapter in the country’s financial and economic crisis and could have severe repercussions on the tiny country, risking legal action by lenders that could further aggravate and push Lebanon's economy toward financial collapse. The currency has already lost up to 60% of its value on the dollar on the black market and banks have imposed crippling capital controls on cash withdrawals and transfers.
By saying that Lebanon will suspend paying back the debt rather than directly saying it will not pay it, Diab's government appeared to be keeping the door open for negotiations with creditors.
Opinions in Lebanon were split on whether to pay or not. Local banks, who are a main lender to the state, say the bonds should be paid on time to protect the country's reputation. Others say the central bank's dwindling foreign currency reserves should be saved to import wheat, fuel and medicine in the coming months.
Lebanon has been suffering in recent years from a lack of economic growth, high unemployment and a drop in hard currency inflows from abroad. The financial crisis erupted amid nationwide protests over widespread corruption and decades of mismanagement by the ruling political class.
Source: Naharnet
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