In a report, Lebanon’s broadcaster LBC quoted the country’s Finance Minister Ghazi Wazni as saying Lebanon will resort to a disorderly default if creditors are not prepared to negotiate; he went on to add, investors will find it difficult to seize Lebanon’s assets held abroad, including gold, in case of a default.
On Saturday, Lebanon announced that it was not in a position to meet upcoming debt payments, given the country’s critically low foreign currency reserves which it needs to cover essential imports and called for “fair” talks to restructure its debts.
Lebanon is aiming to restructure its near $31 billion portfolio of bonds, even as $1.2 billion Eurobond matured on Monday.
Wazni told LBC that the country’s central bank had $29 billion in reserves and that $7 billion had been disbursed to local banks to help them meet their internal and external obligations.
As part pf the “many steps” that could potentially be taken to help resolve the country’s deep financial troubles, Wazni said, merging Lebanon’s banks was a “prerequisite”; the banking sector also needs an additional injection of funds to the tune of $20 to $25 billion.
One of the first reforms the government is working to table focuses on the electricity sector. Proposals include reducing government funding in the electricity sector while increasing tariffs, levying a value-added tax on luxury goods as well as hiking fees on select goods without impacting existing pricing structure of gasoline to contain inflationary pressures.
Arab countries as well as the West have pledged to support Lebanon with $11 billion, however the bulk of them is subject to enacting tough reforms aimed at slashing corruption of government wastage.