Lebanon will default on its debt for the first time in the country's history, after failing to settle the $1.2 billion Eurobond payment due today.
Prime Minister Hassan Diab announced the government's decision to withhold payment and seek to restructure public debt in a statement on Saturday.
"Our international reserves have reached critically low levels, forcing the Lebanese Republic to withhold all the payments on the Eurobonds that are due on March 9."
The decision came after talks between Diab, President Michel Aoun, Parliament Speaker Nabih Berri, Governor of the Central Bank Riad Salameh, and head of the Association of Banks in Lebanon Salim Sfeir, as well as a cabinet meeting and vote on Saturday.
Lebanon's total debt exceeds $90 billion and amounts to 170 per cent of the country's GDP.
Diab described the debt as "greater than Lebanon can bare", adding that "it has exceeded Lebanon's capability to pay its interests".
The default marks a new chapter in Lebanon's economic and financial crisis which has seen the Lira lose nearly 50 per cent of its value, rising prices and supplies shortages, and the imposition of strict capital controls and banking restrictions which have prevented depositors from accessing funds.
The World Bank estimated that up to 40 per cent of Lebanon's population may soon be living below the poverty line.
Diab added that "the Lebanese government will seek to restructure its debts in a way that is consistent with national interest", with restructuring negotiations with creditors set to commence in two weeks.
President Aoun said the decision had "opened the door for negotiations with lenders to reduce the size of the public debt and all of its servicing and to schedule it in a way that suits the state's capacity to pay."
While Economic Minister Raoul Nehme told Lebanese broadcaster Al-Jadeed that "the negotiation process will last for months and if we have good intentions will not go on for more than nine months."
In Saturday's address, Diab also announced a programme of comprehensive reforms "to build a resilient and sustainable economy on solid and modern grounds".
Reports suggest Diab's reforms include those contingent on the release of $11 billion in aid, pledged by 51 countries at the CEDRES conference in Paris in 2019, which would help to re-float the economy.
It remains unclear if Lebanon will seek an IMF bailout, after seeking technical assistance from the fund in February.