Lebanon's Bond Restructuring Faces Global Interest Rate Challenge

Lebanon's central bank issued a cautionary note on Friday, highlighting how persistent global interest rate hikes could hinder the country's ongoing attempts to restructure its international bonds. This comes amid recent surges in the bonds' value, boosting hopes for a successful debt overhaul.

This warning was featured in the central bank's mid-year Macroeconomic Review, the first public document of its kind released in several years. Salim Chahine, the deputy central bank governor, addressed the media, stating that this publication serves as an opportunity to rebuild market confidence that has waned over time. Lebanon's financial crisis began to escalate in 2019 due to rampant governmental corruption and excessive spending, leading to a national default on $31 billion in international bonds by March 2020.

Despite the dire financial circumstances, Lebanon's defaulted bonds have experienced a remarkable recovery, climbing from just over 10 cents at the year's start to approximately 23 cents on Friday, registering modest gains. The bank's review also highlighted a growth in liquid foreign currency reserves, now at $11.3 billion, and an increase in gold reserves valued at $30.28 billion, attributed to rising gold prices.

(With inputs from agencies.)