There has been a similar topic before, but it is old, and it went into politics(which I don't want this one to do) I'm going to write some facts, describe some things the way I understand them(although I am NOT an economics major, just a hobbyist) and then ask for opinions... If you like economics you might find the below reading fun. And before anyone says "Riyad Salemeh assures us we're fine" let me tell you Riyad Salemeh is the LAST person you should trust on these things. It is his JOB to say exactly that, saying anything else causes a panic, mass withdrawals and doomsday happens. The whole economic system is built on a lie, as long as people keep believing it the system keeps floating.
Anyway, as it stands, our debt is around 75 billion dollars and 150% of our GDP. Most of that debt is held internally by our banks(not sure what the percentage is, but I think more than 60%). For those who don't understand how that works, you know when you go to the bank and deposit some money you're saving, and the bank gives you around 5% interest a year? Yeah, well the bank is giving you that interest rate because it basically took your money and loaned it to the Lebanese government, and that is the interest rate the Lebanese government is paying(it's probably paying more but the bank takes a cut). As the debt to GDP ratio increases, we move more and more into danger territory as the debt becomes "unsustainable" And foreign creditors and foreign countries look at that ratio and decide that Lebanon is too dangerous to loan any money as the country is unlikely to be able to pay it back, which is more or less what is happening now.
The Lebanese governments(without going into politics) Did not take any measures to control debt, in fact since last year alone we seemed to have gained around 5.5 billion dollars in new debt. Each year on year this value increases mainly because the sources of more debt is ironically the debt itself(its interest rate is very high and it seems to be transforming into its own debt)
The raw amount of debt for a country actually does not matter that much, for example for Lebanon, whether it is 80 billion or 20 billion is not the problem, debt is mainly measured against the economic power of the nation, the GDP. So despite for example the US having over a trillion dollars in debt, they are still fine because they have a big economic power that can handle it. Having debt is not inherently bad, if you can keep growing your economy to stay on top of it, which we are not doing (economic growth 1% this year vs like 5% for the debt).
Anyway back to the problem. As the debt becomes bigger and riskier, the government will struggle to find sources to fund it. There is so much risk banks can take(And Lebanese banks it seems went over their heads with risks funding the governments) with bigger risks, the government might need to raise the interest rates to motivate more people to deposit their money and to motivate banks to buy more debt, but as the size of the debt increases, even a 1% increase in interest rate becomes a very large sum of money to pay yearly.
Now the other question asked, what if Lebanon decides to just not pay(and here this is my subjective thinking). Well, now there is the fun part. If you decide not to pay the local creditors(a.k.a the Lebanese citizens who have bank deposits in Lebanese pounds) The currency gets devalued, because no one would trust it anymore, everyone will want to go to the safer dollar as the Lebanese government cannot be trusted and thus its printed currency cannot be trusted. Many citizens lose their money and thus get screwed.
Another thing they can do is just devalue the currency, and pay its new worth in dollars back. So lets say make the dollar 5000LL and then pay the creditor who loaned the government 5000 LL 1$, it has similar results to the step above, devalue currency, panic in the market, people go poor.
What happens if Lebanon default on foreign debt. Well that is easy, they won't loan you money anymore the next time you need it. You know those government salaries for the army and the teachers and the daman and electricity? Yeah one of those now has to disappear to meet the budget because going over and taking a loan is no longer an option, and thus people get screwed. And that is the best case, the worst case, it really negatively impacts your foreign relations, you lose friends, deals etc... Just look at Greece for a short answer(even though they are still trying to pay) Not to mention it would cause a panic for the domestic creditors and everyone will run to the bank to keep their money safe. Mass panic>doomsday.
Usually we would have counted on being saved by international friends, or Saudi Arabia dropping a billion on us(like in 2006) But everyone is in financial trouble.
In my pessimistic opinion, the LBP is already 3000 LL, it's just that people are not aware of it yet.
Now after all this I have a question. Is putting money in a Lebanese bank in dollar currency in a current account in dollars safe? Or should I buy a giant safe and deposit them at home?(it's extreme I know, but I'm throwing it out there)
Some sources:
http://tinyurl.com/zy64xbv
http://blog.blominvestbank.com/wp-content/uploads/2015/06/Debt-Sustainability-Analysis-for-Lebanon-2015-2020.pdf
There are many