“We Need A Shock”: PM Hariri Resigns Amid Protests, Lebanon’s Dollar-Bonds Plunge

After twelve days of massive anti-corruption protests essentially bringing life in Lebanon to a standstill, with banks and schools shuttered and major roads blocked, Lebanon’s Prime Minister Saad Hariri says he is ready to submit his resignation. 

In an address to the nation at 4pm Tuesday afternoon (local time), Hariri confirmed he’s submitting his government’s resignation to President Michel Aoun after rumors of his stepping down swirled all day. Hariri said he had “reached a dead end” amid the protests which have reportedly involved one million people, or up to 25% of Lebanon’s total population, and further called on “all Lebanese to protect civil peace”.

A reform package proposed by the prime minister last week, which promised to enact delayed economic reforms and tackle widespread corruption, failed to appease the cross-sectarian demonstrations that had been sparked earlier this month by a proposed tax increase after public coffers were depleted. 

“We have reached a deadlock and we need a shock in order to brave through the crisis,” Hariri said in a televised statement from the capital, Beirut.

“I’m heading to the presidential palace to tender the resignation of the government … This is in response to the will and demand of the thousands of Lebanese demanding change,” he added.

This as a “panic” run on banks looms after the country’s banking association claimed it was necessary for the banks remain shuttered due to “safety concerns” related to the protests. The association has since been reportedly engaged in crisis meetings over how to prevent a simultaneous scramble on the part of the public to remove all deposits. 

Lebanon’s central bank governor issued a stark warning Monday, saying a political solution must be found immediately to “restore confidence and avoid any future economic collapse.” It appears the dramatic move of PM Hariri’s resignation is intended to do just that. Lebanon’s sovereign dollar-bonds suffered fresh falls on the news to a new low as a rapid sell-off deepens, accelerating sharply after rumors of Hariri’s stepping down first reached headlines Tuesday. 

As a breaking Reuters report notes, “The 2021 issue dropped 1 cent to a record low of 75.29 cents in the dollar, according to Tradeweb data, with yields at 30.1%.” And further:

Yields on some bonds have soared with the 2020 bond issue reaching 37%, indicating borrowing costs are prohibitively expensive for the heavily indebted country.

Over the course of the protests, which have been mostly peaceful but at times involved clashes with police and blockage of major roadways, banking operations have been “limited to paying out customer and employee salaries via ATMs”. 

Now twelve days in, banks and public institutions have been completely closed for ten business days, with fears of a dollar cash depletion and collapse amid extreme lack of confidence in the local currency and corrupt officials which oversee the system.