On April 3, Lebanon’s deputy prime minister declared that Lebanon as a state has gone bankrupt as did the central bank, and that the loss has occurred. The use of the term “bankrupt” to describe the financial situation of the Lebanese government and central bank, caused many circles to be on alert. The next day, the central bank governor denied that the institution he heads was bankrupt.

LIMS explained that though the government defaulted on the payments of Eurobonds, and this would have led to a private company going bankrupt, the government is sovereign, so it doesn’t go bankrupt. Therefore, the term was incorrectly used. Furthermore, LIMS expressed concerns about the rationale behind the statement as it signals the government’s unwillingness to pay back public sector debt, notably Lebanese banks’ dollar-denominated deposits at the central bank. Defaulting on the payment of this debt would shift all public sector losses to commercial banks and their clients. The public sector appears to abandon responsibility, regarding the loss of depositors’ savings. This analysis was later confirmed by the cabinet’s recovery plan that served as the basis to the IMF agreement.

LIMS argued that pushing the losses of the public sector onto the private sector (i.e the depositors) will only prolong the crisis. The public sector should cut spending, instead of increasing them as suggested in the 2022 budget proposal, and switch to a fiscal surplus to regain the ability to service debt. Failure to address decisions that increase public spending will spell further catastrophe for Lebanon’s economy.

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• What Is The Truth About “Lebanon’s Bankruptcy”? An Economist Answers, April 7, 2022: Hafryat, Article AR
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• Lebanon Suffers From A Liquidity And Solvency Problem, And We Must Aim Towards Economic Re-Growth, Instead Of Liquidation, April 7, 2022: VDL News, Radio Interview AR
• Is Lebanon Really Bankrupt? What Are The Necessary Steps For This Stage? April 7, 2022: Al Mamlaka, TV Interview AR
• Between Declaration Of “Bankruptcy” And “Wave” Of Reassurances…A Reading Of Words From Lebanon’s Deputy Prime Minister, April 11, 2022: Al Majalla, Article AR
• Truth About Bankruptcy Of Lebanon And Its Central Bank, April 11, 2022: Yemen Today, TV Interview AR
• The End Of Banks…Your Deposits Are Guaranteed To A Ceiling Of 75 Million Lebanese Pounds, April 22, 2022: Lebanese Forces, Article AR