Prime Minister Hassan Diab on Wednesday reassured Lebanon’s Economic Committees that there will not be a deposits “haircut” but rather a bond exchange in order to manage Lebanon’s debt.
“Of course we are not speaking of a haircut,” Diab said during a Grand Serail meeting between the Committees and a number of ministers.
“There will be a bond exchange, the same as happens in all countries, and we are not the first or last country to go through a default,” the PM added.
“We need to manage the country in a way that can benefit us over the next years and we therefore need a program that can reassure the international community,” Diab went on to say.
The International Monetary Fund projected Tuesday that Lebanon’s economy will shrink 12% in 2020 amid the country’s worst economic and financial crisis in decades.
Lebanon has suffered in recent years from a lack of economic growth, high unemployment and a drop in hard currency inflows from abroad. But the financial crisis erupted after nationwide protests over widespread corruption and decades of mismanagement by the ruling political class engulfed the country in October.
A lockdown aimed at curbing the coronavirus pandemic has worsened Lebanon’s economic and financial conditions and many businesses have been closed for the past month to limit the spread of the virus.
Last month, Lebanon defaulted for the first time ever on a payment on its massive debt amid ongoing popular unrest. Lebanon’s debt reached $90 billion or 170% of GDP, making it one of the highest in the world.