Sfeir Says Politicians 'Better Not Interfere in Banking System'

Salim Sfeir, the head of the Association of Banks in Lebanon, has said that a default on the country’s Eurobond debt “could have been avoided.”

In an interview with the Financial Times published Wednesday, Sfeir criticized the government, saying the default was “handled in a non-professional manner.”

Politicians “better not interfere in the banking system,” said Sfeir, who is chairman and chief executive of Bank of Beirut. “Let it be the responsibility of the central bank and not the politicians,” he said.

Sfeir also blamed the public sector for “bad management” leading to the cash crisis.

Lebanon is currently facing its worst economic crisis since its 1975-1990 civil war. The value of the Lebanese pound has plummeted on the black market, prices have risen, and many businesses have been forced to slash salaries, dismiss staff or close.

Lebanon is one of the most indebted countries in the world, with a public debt equivalent to 150 percent of its GDP. The country defaulted on a $1.2 billion Eurobond debt that was due to be paid on March 9.

Economists had warned that payment on time would eat away at plummeting foreign currency reserves, while bankers cautioned that a default would damage Lebanon's reputation with lenders.

Bank of America Merill Lynch in a November report estimated that around 50 percent of Eurobonds were held by local banks, while the central bank had around 11 percent.

Foreign investors owned the remainder, or around 39 percent, it said.

But these figures may have changed, with local media reporting that local banks have recently sold a chunk of their Eurobonds to foreign lenders.