For the first time, Lebanon defaults on its debts

lebanon debts currency banksb bcommercial

For the first time, Lebanon defaults on its debts

Its currency, the pound, is officially pegged to the dollar, but has lost more than 40% of its value on the black market.. Banks impose ever-stricter capital controls because they lack the hard currency to repay depositors.. Before Mr Diab's announcement, the government was reduced to pleading with Lebanese banks to buy back some of their holdings.. For years the central bank, the Banque du Liban (BdL), borrowed dollars from commercial banks to sustain the currency peg and cover big fiscal and current-account deficits (in 2018 they were 11% and 26% of GDP, respectively).. Commercial banks had 247trn pounds ($160bn, at the official rate) in deposits in December, an 8% drop from a year earlier.. Lebanon may have to negotiate a deal not only on its bonds, but also on deposits held by the BdL.. But if the central bank defaulted on deposits, it would be a death blow to the financial sector, which has 55% of its assets tied up there.. Though still officially pegged at 1,500 to the dollar, last week the pound was trading beyond 2,600.. Such is the state of Lebanon's economy: a firm controlled by the central bank no longer wants to accept the currency…

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