In a further deep step into its crisis, Lebanon announced yesterday that it cannot meet its debt payments and halted a March 9 bond payment of $1.2 billion.
In a televised address to the nation, Prime Minister Hassan Diab said foreign currency reserves had hit a "critical and dangerous" level and were needed to meet basic needs. He called for "fair" negotiations with lenders to restructure the debt for his country.
The newest announcement set the heavily indebted state on course for a sovereign default that will mark a new phase in the major financial crisis that has hammered the economy since October, slicing around 40% off the value of the local currency, denying savers free access to their deposits and fuelling unemployment and unrest.
"How can we pay creditors abroad when the Lebanese cannot get their money from their bank accounts?" Diab said. "Our debt has become greater than Lebanon can bear, and greater than the ability of the Lebanese to meet interest payments."
"We are paying the price for the mistakes of the past years. Must we bequeath them to our children?" Diab said.
The Lebanese had "lived a dream that was a delusion as though things were just fine, while Lebanon was drowning in more debt", he said.
As protests erupted last year over decades of state corruption and bad governance, the capital inflows slowed, fueling more unrest.
According to Reuters, there has been no sign of a bailout from foreign states that aided Lebanon in the past. Western governments insist Beirut first enact long-delayed reforms to fight waste and corruption.
Diab was appointed in January with backing from the Iran-backed group Hezbollah and its allies. Former prime minister Saad al-Hariri, a traditional ally of the West and Gulf Arab states, stayed out of the government.
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