BEIRUT: Lebanon cannot pay a $1.2 billion debt due on Monday, Prime Minister Hassan Diab admitted on Saturday.

In a televised address to the nation, the prime minister suspended the eurobond payment because foreign currency reserves had hit dangerously low levels and were needed to meet basic needs.

The suspension sets Lebanon on course for a sovereign default if it cannot restructure its debts.

Diab said Lebanon’s public debt was about 170 percent of its gross domestic product and had “become bigger than Lebanon can bear, and bigger than the ability of the Lebanese to meet interest payments.”

“In light of the current situation, the state cannot pay the coming maturities,” he said. “The Lebanese state will strive to restructure its debt in line with the national interest by holding fair, well-intentioned negotiations with all lenders.”

Lebanon’s banks had wanted to pay the debt “to preserve Lebanon’s external reputation,” but a source familiar with the negotiations on the issue told Arab News that the banks refused “payment of the financial obligation from the profits that they achieved over the years.”

The government action awakened the street again. On Saturday evening, groups of activists took to the streets to protest against any attempt to seize and dispose of their bank savings and deposits.

Lebanon hired a team of sovereign debt management specialists to advise the government.  They concluded that the authorities were late in launching a negotiation process with creditors to request a delay in payment.