Lebanon‘s Unpaid Debt Reaches $8.2 Billion, Restructuring Hinges on IMF Deal
Beirut, Lebanon – Lebanon’s accumulated unpaid debt benefits on Eurobonds have surged too $8.2 billion as of the end of 2023, since the country ceased debt and benefit payments in March 2020, according to data released by the Central bank. This represents an average accumulation of $2.7 billion per year during the ongoing economic crisis.
The situation differs considerably for debt bonds denominated in Lebanese Lira. Unlike the Eurobonds, the Lebanese state has continued to service these lira-denominated debts, as payments do not require the use of dwindling foreign currency reserves. The total value of these lira bonds currently stands at approximately 92 trillion Lebanese pounds – equivalent to roughly $1 billion USD.
while this figure was once significantly higher, estimated at over $62 billion based on the pre-2019 official exchange rate, the dramatic devaluation of the Lebanese pound has drastically reduced its real value. Consequently, the Lebanese government now considers servicing these lira-denominated debts manageable and sees no immediate need for rescheduling.
Ownership of the lira bonds is also concentrated within Lebanon. The Bank of Lebanon holds 62.1% of the debt, with other public institutions, including the National Social security Fund, owning approximately 21%.The banking sector currently holds 17%, and foreign investors are largely absent. This means the settlement of these debts primarily concerns internal state entities, who collectively possess 83.1% of the total.
Despite the differing situations with Eurobonds and lira bonds, a extensive restructuring of Lebanon’s public debt remains stalled. Officials emphasize that progress is contingent upon reaching an agreement with the International Monetary Fund (IMF). Securing a trust certificate from the IMF is seen as crucial to persuading creditors to reschedule their debts.
Further progress in negotiations with the IMF requires Lebanon to complete remaining reforms,most notably enacting financial order laws. lebanon has already taken steps this year, including approving legislation to lift banking secrecy and reform banking conditions.
