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Lebanon Lawmakers Say Government Shouldn’t Default on Local Debt

Dana Khraiche

(Bloomberg) --

Lebanese lawmakers urged the government to avoid a default on its local-currency debt and asked it to reevaluate central bank liabilities to help secure a critical bailout from the International Monetary Fund.

Member of parliament Ibrahim Kanaan said Wednesday that the IMF held a meeting with lawmakers earlier this month and told them Lebanon faces a choice of “no reform, no program” -- referring to the $10 billion loan the government is trying to negotiate with the Washington-based lender.

The government in March defaulted on a Eurobond for the first time in its history and is now seeking assistance to help implement fiscal reforms, including the restructuring of both local and foreign debt. It drafted a rescue plan that showed the financial sector had incurred massive losses, an assessment that came under heavy scrutiny from local lenders and the central bank.

Kanaan, who was accompanied by other lawmakers, argued during a televised conference that the government should reevaluate the central bank’s long-term liabilities, which were counted as a loss in the plan it presented to the IMF.

He criticized the government for failing to hold talks with lenders and the central bank over the losses and defended the parliamentary committee’s work that critics say favored the bankers. Two members of the Lebanese government team negotiating with the IMF resigned last month, a reflection of a divide within the country’s establishment.

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