Lebanon FinMin: Disorderly default if creditors unprepared to negotiate

Lebanon FinMin: Disorderly default if creditors unprepared to negotiate

BEIRUT (Reuters) – Lebanon will resort to a disorderly default if creditors are unprepared to negotiate, broadcaster LBC quoted Finance Minister Ghazi Wazni as saying on Monday, while noting that assets held abroad such as gold will be difficult for investors to seize.

Lebanon announced on Saturday it could not meet upcoming debt payments, saying critically low foreign currency reserves were needed to cover essential imports and calling for “fair” restructuring talks.

The country’s $1.2 billion Eurobond matured on Monday, part of a roughly $31 billion portfolio of bonds the country is seeking potentially to restructure.

Wazni told the broadcaster the central bank had $29 billion in reserves and that $7 billion had been given to local banks to help them meet internal and external obligations, according to LBC’s Twitter feed.

Wazni said that there were “many steps” that could be taken to resolve the deep problems faced by Lebanon’s commercial banks, and that merging them was a “prerequisite” as well as injecting $20 bln – $25 bln of liquidity from abroad.

He said the first major government reform being prepared was focused on the electricity sector and that proposals for reducing government spending include raising the electricity tariff, a value-added tax on luxury goods and raising fees on some goods without increasing taxes on gasoline.

Western and Gulf Arab countries have pledged some $11 billion in support but have made any financial help conditional on enacting tough reforms to reduce government waste and corruption.

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