The case for Lebanon restructuring its debt

Lebanon’s economic vulnerabilities are on full display. Investors and other stakeholders have lost confidence in the Lebanese financial system, triggering an existential economic crisis. In short, Lebanon’s future is jeopardized by three intertwined crises of sustainability with regard to the public debt, the current account deficit, and the financial sector. As such, resolving Lebanon’s crisis requires a full-blown multifaceted stabilization and reform plan initiated by restructuring the stock of public debt. Restructuring Lebanon’s stock of public debt is inevitable since it has exceeded the economy’s capacity to service it. Expected to be at around $90 billion—and assuming it can be refinanced at 7 percent over seven years—the stock of debt will demand roughly $19 billion in maturities and coupons annually, or around one third of 2018’s GDP. This high level of debt service is not a new phenomenon and governments have sustained it from borrowing from the market and building