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Lebanon Says It Can't And Probably Won't Pay Back Its $47 Billion Debt

Lebanon is expected to announce a debt default in the newest phase of a financial crisis that has lead banks to deny savers full access to their deposits.

Lebanon looks set to announce on Saturday it cannot make upcoming US dollar bond payments and wants to restructure $47 billion of foreign currency debt, sources say, unless a last-minute deal with creditors is found to avoid a disorderly default.

Debt default would mark a new phase in a financial crisis which has hammered Lebanon's economy since October, slicing about 40 percent off the value of the local currency and leading banks to deny savers full access to deposits.

Prime Minister Hassan Diab will announce Lebanon's decision on the Eurobonds after government meetings on Saturday, just two days before the heavily indebted state was due to pay back holders of a $1.8 billion Eurobond due on March 9.

A woman walks past a bank, with windows damaged by anti-government protesters, in Beirut on March 6. Debt-ridden Lebanon is facing its most serious economic crisis since the end of its 1975-1990 civil war. Image: JOSEPH EID/AFP via Getty

"Lebanon is heading tomorrow towards announcing it will halt payment, or its incapacity to pay the Eurobonds and the interest," a senior political source involved in government discussions on the matter told Reuters.

"The Lebanese government will do all it can to reorganise its relations with its debtors and to open the door for negotiations," the source said.

"When we talk about restructuring, we are talking about all the (Eurobond) debt of $47 billion."

Parliament Speaker Nabih Berri, one of the most influential figures in Lebanon and an ally of the powerful Hezbollah group, said on Wednesday local time a majority of MPs backed not paying back the debt.

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The senior source and three others familiar with the matter told Reuters last-minute contacts continued but all expressed doubt a breakthrough was possible.

A second senior political source said these efforts had aimed to avoid a disorderly default but there was little hope of a deal.

"They are trying but I don't think there's any hope," echoed a third source close to the government.

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