Factbox: Lebanon was living a ‘delusion’ – excerpts from PM’s speech

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BEIRUT – Lebanon cannot meet its debt maturities, the prime minister declared on Saturday, setting the heavily indebted state on course for a sovereign default as it faces a crippling financial crisis.

Here are key excerpts from the official Arabic version of Prime Minister Hassan Diab’s televised speech, translated by Reuters:

ON LEBANON’S ECONOMIC MODEL

“Can a country’s economy be based on borrowing? Can a nation ever be free if it is drowning in debt?

“Today, we are paying the price for the mistakes of past years. Must we bequeath them to our children and the coming generations?”

“The Lebanese lived a dream that was a delusion, as though things were just fine, while Lebanon was drowning in more debt and its interest, including in foreign currency, until the gross public debt exceeded $90 billion, which makes up around 170% of the domestic output.”

“The economic model which past policies imposed has proven to be a failure, especially with its inability to stimulate investment and create job opportunities.”

“The state was stuck in a spiral of deficit and endless borrowing. The reality today is that for every 1,000 Lebanese pounds of the state’s revenues, more than 500 Lebanese pounds go to servicing the debt, instead of spending it on healthcare, education and infrastructure.”

“This approach is not sustainable and cannot go on, especially as Lebanon is today on the verge of becoming the most indebted country in the world relative to the size of the economy.”

ON THE CRISIS

“Our country is going through a critical period of its history, sailing through rough and turbulent seas.”

“In the daily lives of the Lebanese, there is a bitter struggle with unemployment, high costs of living and dilapidated infrastructure. All of this adds to the suffering and tragedy of the Lebanese people, building their resentment toward the state.”

“According to the World Bank’s estimates, more than 40% of residents may soon find themselves under the poverty line.”

ON DEBT RESTRUCTURING

“Our reserves have reached critical and dangerous levels, which has pushed the Lebanese state to withhold the March 9 Eurobond maturity, due to the need to use these amounts to secure the basic needs of the Lebanese people.”

“Our debt has become greater than Lebanon can bear, and greater than the ability of the Lebanese to meet interest payments.”

“This decision is, today, the only way to stop the bleeding and protect the national interest.”

“The Lebanese state will strive to restructure its debt in line with the national interest by holding fair, good faith negotiations with all creditors.”

“How can we pay creditors abroad when the Lebanese can not get their money from their bank accounts?…How can we pay creditors and there are people in the streets who do not have the money to buy a loaf of bread?”

ON THE BANKING SECTOR

“The main role of the banking sector has shifted from supporter and funder of the economic cycle to a mediator that works, on the one hand, to attract deposits at high dollar interest rates exceeding 5 to 10 times those of other banks around the world, and on the other hand lends to the state at a higher interest rate.”

“The growth of our economy and its entrepreneurs cannot be achieved without the support of its banks. But at the same time, we do not need a banking sector four times the size of our economy. We will have to come up with a plan to restructure the banking sector.”

“We are still evaluating proposed options at hand and they are many. But let me be clear, we will work to protect deposits in the banking sector, especially small deposits which make up more than 90% of total bank accounts.”

 

“We will soon present a draft law to regulate the relationship between the banks and their customers, for it to become more fair and just.”

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