BEIRUT — Already beset by inflation, an economic recession and a lack of trust from large segments of the public, Lebanon’s month-and-a-half-old government is now also staring down a debt crisis ahead of a maturing $1.2 billion Eurobond payment due March 9. This payment marks the first of several deadlines that continue into April and June of this year, and makes up a part of the country’s total debt, which reached $90 billion at the end of 2019 — 150% of Lebanon’s gross domestic product (GDP). To address the looming payment, Lebanon has brought in the International Monetary Fund (IMF) for technical assistance, and has hired asset management company Lazard and the law firm Cleary Gottlieb Steen & Hamilton to advise it on a potential restructuring plan.

Prime Minister Hassan Diab said March 2 that a final decision on the Eurobond payment would be made March 6 or 7. The government has reportedly still been unable to reach a deal with bondholders, but some lawmakers and authorities have cited an orderly default as the preferred course of action, which would entail both a restructuring and rescheduling of Lebanon’s Eurobond debt.

According to financial experts and insiders, the socioeconomic effects of a restructuring would be far-reaching. For Lebanon to extricate itself from its fiscal and economic crises, longer-term restructuring of the banking sector must take place together with political reforms and the development of an export economy, allowing the country to emerge from its doldrums with a more reliable banking sector. However, in the short-term, a restructuring deal or a default would result in further devaluation of the Lebanese pound, continued price increases and further diminished standards of living, exacting a heavy toll in a country where a social safety net does not exist to mitigate such effects.

“Debt restructuring is inevitable,” member of parliament Alain Aoun told Al-Monitor. Aoun is a member of the Free Patriotic Movement, which backed the current Cabinet, and is engaging in consultations with Finance Minister Ghazi Wazni and other officials via parliament’s finance and budget committee. “The default, or what to do with the next payment, it has to wait for the negotiation. … [The] preferred course of action is to go into an orderly default, and not a disorderly default,” he said.