Lebanon will default on foreign debt payment

BEIRUT » Lebanon will default on $1.2 billion in foreign currency debts coming due Monday, the prime minister said Saturday as the country lurched deeper into an economic crisis that has set off widespread antigovernment protests and left the country grasping for a foreign bailout.

Amid a rapid devaluation of the Lebanese pound, shortages of imports, a slow-motion bank run and thousands of layoffs, the decision is likely to appease protesters who have clamored for the government to prioritize domestic concerns over repaying the Eurobond, as the debt is known.

But it brought Lebanon, one of the most indebted countries in the world, little closer to a resolution of fiscal problems that go back decades.

“The reserves of hard currency have reached a critical and dangerous level,” Prime Minister Hassan Diab said in announcing that the government would not make the debt payment. “It is necessary to use these funds to secure the basic needs of the Lebanese people.”

Some economists and policymakers had argued against a default to preserve Lebanon’s unblemished record of repaying its debts, pushing instead to restructure it. Without giving specifics, Diab said the government would seek to negotiate with creditors to restructure the rest of its foreign currency debt, which totals $31 billion.

In recent weeks, the government has been consulting with the International Monetary Fund, signaling that it would seek a bailout if its divided political factions can reach a consensus. But any international aid package is likely to come at the price of austerity measures that will be difficult for an already frustrated Lebanese public to accept.