Lebanon's prime minister has said his country is unable to pay its foreign currency loans and is to default on its sovereign debt for the first time ever.

Hassan Diab made the announcement in a TV address to the Middle East nation which is currently engulfed in a major financial crisis.

Lebanon has a $1.2bn (£900m) Eurobond due on 9 March, but Mr Diab said the payment will now be suspended, following cabinet talks.

He claimed foreign currency reserves have hit critical levels and the money is needed to meet the basic needs of Lebanese people.

Feb 2020: Families struggle in crisis-hit Lebanon

Debt has reached $90bn (£69bn) or 170% of GDP (gross domestic product) - making it among the highest in the world, he claimed.


He also said the total debt and interest Lebanon had to pay back in 2020 stood at $4.6bn (£3.5bn).

The value of its local currency has fallen by about 40% since October and mass protests have taken place for months against authorities.

Feb 2020: Protests in Lebanon

Mr Diab said Lebanon's six-week-old government was not able to pay maturing debt in the "current circumstances" and it wanted to restructure the loans through negotiations with its bondholders.

But the government's decision risks legal action by lenders that could further push the economy towards financial collapse.

The crisis, where savers have been denied full access to money in their bank accounts, is seen as the biggest risk to Lebanon's stability since the end of the 1975-90 civil war.

Feb 2020: 'Lebanon is in a very serious crisis'

Banks have imposed crippling capital controls on cash withdrawals and transfers.

Opinions are divided on whether or not Lebanon should pay the loans.

Local banks, which are a main lender to the state, say the bonds should be paid on time to protect the country's reputation.

Others say the central bank's dwindling foreign currency reserves should be saved to import wheat, fuel and medicine in the coming months.

Lebanon's $1.2bn Eurobond is part of a portfolio of $31bn in dollar bonds that it reportedly wants to restructure.