WORLD Lebanon urges talks with foreign bondholders to avoid lawsuits over debt default

WORLD

Lebanon urges talks with foreign bondholders to avoid lawsuits over debt default

Xinhua

08:30, March 10, 2020

BEIRUT, March 9 (Xinhua) -- Lebanese Finance Minister Ghazi Wazne on Monday called for holding flexible negotiations with Lebanon's foreign bondholders in a bid to avoid lawsuits over its default on debt.

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File photo: CGTN

"If bondholders show flexibility with Lebanon then we will be going to an organized debt restructuring but if not then we may face lawsuits by lenders," Wazne told the LBCI TV channel in an interview.

He noted that the government has appointed a legal consultant to negotiate with foreign bondholders over Lebanon's debt restructuring.

Wazne said that foreign lenders cannot put their hands on the assets belonging to the government in foreign countries, namely Lebanese embassies because they enjoy diplomatic immunity.

"Also, we have been told by our legal consultant that it is difficult for lenders to acquire our gold or the Middle East Airlines because they belong to the Central Bank," he said.

Wazne assured that there are five committees currently preparing a program to be shared by the International Monetary Fund which will offer its technical advice.

The minister said that the priority of the government is to solve the electricity problem which costs the treasury around 1.5 billion U.S. dollars.

He said that the government may also increase the value added tax on luxurious products in addition to imposing taxes on some imports in a bid to reduce the trade deficit.

"We will continue halting employment in the public sector in addition to fighting against tax evasion and corruption," he said.

Lebanon has for the first time in its history announced its decision to default on its debt amid an increase in its public debt to an alarming level of over 90 billion U.S. dollars.

On Monday, the Fitch global ratings agency downgraded Lebanon's foreign currency rating from CC, indicating very high levels of credit risk to C, meaning near default.

Fitch noted that if Lebanon fails to pay the Eurobond once the granted period of seven days for paying it is up, the rating agency will downgrade its sovereign rating to RD (restricted default) and the 1.2-billion-dollar Eurobond that matured on Monday to D (default).

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