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Who still remembers that we have a public debt? No one mentions it anymore in the higher spheres of government, and nobody knows if the State intends to repay it entirely, partly, or not at all. Since the 2020 “rescue plan”, the authorities have thrown the veil over it, up until the last initiative, taken by Saadeh Chami. That’s when the debt in question turned, as if by magic, to a “financial black hole”. The lexicographer’s job must be a challenging one.

Occasionally, international organizations remind us of it, although we never asked for it. More recently, the Fitch rating agency did that, for all the wrong reasons. It has downgraded Lebanon’s rating yet again – one might think we already reached the Titanic, especially since we have defaulted on our dollar payments as early as 2020.

But it seems like there were still ways to sink even deeper. Fitch’s downgrade was named “restricted default”, and it was on the debt in LBP this time. Seemingly, the State – that doesn’t pay any sum to creditors in dollars anymore – has also stopped paying interest rates on debts in LBP recently, specifically to the Central Bank, which holds most of these treasury bonds. It continues to pay such interests to banks (that own 25% of them). However, Fitch believes this will not last: why stop when you are on the right path? The State’s reputation is already in shambles, an extra shortcoming won’t change much. Now that the banks have been robbed of their dollars, it is time to take away all Lebanese pounds, too.

Let us explain the whole debt story and how to solve it, as per the many proposed solutions.

Debts in dollars, in other terms the eurobonds we have defaulted on, now amount to approximately 40 billion dollars including interest, 80% of which are sustained by foreign funds, and 12% by the Central Bank. The rest lies on the shoulders of local banks and individuals.

Even if we stop hearing about them, these international debt obligations will not go away, not in one year, not in ten years, not even in thirty. No creditor will say “I am gonna forget about this” and consider it an irrecoverable debt. Such a situation simply won’t arise. The loans issue of czar Nicolas II of Russia were only settled in 2019, when politicians and the justice system intervened to solve the problem. Even today, a group intends to appropriate the Saint Nicolas cathedral in Nice, apparently owned by Russia…

Meanwhile, these eurobonds can be exchanged on the market for 6-7% of their nominal value, thus bringing the 40 billion dollars down to just 2.5 billion. Camille Abou Sleiman, former minister and expert in this field, has called upon the State to buy these Eurobonds at the reduced price. No one listened to him.

Evidently, getting them at this price would be good for our finances, but bad for our reputation. If, let us suppose, the government agrees to do that, the prices will inevitably surge. Therefore, negotiating with creditors seems to be the best option if a discount is what is needed.

In its most recent report, the IMF estimated that the market can discount – or “haircut” – up to 75% on certain series, but this is pure speculation and in no way represents the position of creditors. If that eventually proves to be a possibility, there would still be 10 billion dollars to pay, and the State doesn’t even have a penny.

As for the debt in local currency, it is equivalent to 100 trillion LBP. If one were to calculate it at the market rate, it would amount to a mere 1.2 billion dollars. In this case, too, we don’t have the means to repay it. Even worse, we can’t pay the interest of it.

One cannot help but wonder if this is a case of insolvency, or something else entirely. Let us say that it is rather a refusal to repay a debt and honour a commitment. As a matter of fact, tens of propositions have been made by specialists ever since the problem arose. These propositions mostly revolve around better management of the State’s assets, its commercial institutions, its owned land, and its gold.

Said propositions were met with total refusal or – when the formula is too complex – total confusion. In any case, the excuse given is that these assets are the property of all the Lebanese, as if experts initially thought that the beneficiaries were of Gabonese nationality. Clearly, the real reason behind this refusal is that the assets in question are a goldmine – be it an actual or a potential one – for the pillagers of the republic, and that it would be a total waste to let them go.

We have come to notice that ministers and their teams in a caretaker government are usually more gluttonous, because they cannot hold their seats forever.

But in the lower spheres, people find consolation in realizing that Barbie is still chaste, and her reputation preserved.