Lebanon says cannot pay debts, sets stage for default

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NSTworld: The default will mark a new phase in a crisis that has hammered the economy since October, slicing around 40 per cent off the value of the local currency, denying savers free access to their deposits and fuelling unemployment and unrest.

In a televised address to the nation, Prime Minister Hassan Diab said foreign currency reserves had hit a “critical and dangerous” level and were needed to meet basic needs. He called for “fair” negotiations with lenders to restructure the debt.

The long-brewing crisis came to a head last year as capital inflows slowed and protests erupted over decades of state corruption and bad governance. There has been no sign of a bailout from foreign states that aided Lebanon in the past. Western governments insist Beirut first enact long-delayed reforms to fight waste and corruption.

The gross public debt has reached around 170 per cent of gross domestic product, meaning Lebanon is close to being the world’s most heavily indebted state, he added. “From what we understand the government wants to be reasonable and so do most creditors. They understand the country is in a difficult situation,” the member said.

 

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