Lebanon's prime minister-designate Saad Hariri stepped down Thursday, saying he was unable to form a government, nine months after accepting the challenge and as the country sinks deeper into crisis.

International donors remain adamant that a government must be established before they can open credit lines, but political squabbling among Lebanese factions has repeatedly stymied those efforts, amid soaring poverty rates and a collapsing local currency.

Hariri's announcement takes the painstaking process of forming a new government back to square one and brings the risk of many more months of drift.

President Michel Aoun will now have to call on parliament to pick a new premier-designate, who will be tasked with assembling a new cabinet which in turn will have to be approved by the president and political factions.

Hariri's decision followed a meeting with Aoun over his draft cabinet lineup.

"There were amendments requested by the president, which I considered substantial," Hariri told reporters after the meeting.

"It is clear that... we will not be able to agree," he added, noting that the president had expressed the same opinion.

Aoun's office hit back in a statement, saying that Hariri "was not ready to discuss amendments of any kind."

Hariri told the president to spend an additional day reviewing the draft, "but what's the use of an extra day if the door to discussion is closed," Aoun's office added.

Hariri has previously repeatedly accused Aoun of hampering the process by insisting on a cabinet share that would effectively give his team a decision-making veto - charges the president denies.

He had been nominated prime minister designate in October 2020, following a devastating explosion at Beirut port in August caused by unsafely stored fertiliser that killed more than 200 people and forced the previous government to resign.

His exit leaves Lebanon rudderless amid a deepening economic crisis the World Bank has branded as one of the planet's worst since the mid-19th century.

The plummeting Lebanese pound, officially pegged to the dollar at 1,500 to the greenback, plummeted to a new record low on the black market after Hariri's announcement, prompting renewed street protests and road closures.

The pound sold for more than 20,000 to the dollar, blowing out from a level of just beyond 19,700 reached in morning trade.

- Cocktail of crises -

Hariri is the second candidate to fail at forming a government in less than 12 months, as the country's cocktail of political and economic crises escalate.

With seats in government and parliament distributed according to religious sects, Hariri's exit will further complicate forming a government, as he is widely seen as the pivotal representative of the country's Sunni Muslims.

For months, Hariri and Aoun -- who is head of the mostly Christian Free Patriotic Movement party -- have traded blame for delays in establishing a government.

Shiite factions, notably Hezbollah, also wield huge sway over the make-up of cabinets.

The delays have come despite mounting financial woes and growing international pressure, led by former colonial power France.

More than half the population lives below the poverty line, and the country is struggling to import basic items including fuel and medicine due to dwindling foreign currency reserves.

The international community has pledged millions of dollars in humanitarian aid since last year's port blast, pending the establishment of a government.

Hariri, who has previously led three governments in Lebanon, replaced as premier designate Mustapha Adib, a relatively unknown diplomat.

Adib had been nominated in late August but threw in the towel nearly a month later, because of resistance from political leaders over his proposed line up.

Hariri's decision came as Lebanon prepares to mark the first anniversary of the August 4 explosion -- its worst peace-time tragedy -- which many blame on negligence by political leaders.

The disaster forced the last government to resign, although that cabinet, led by outgoing prime minister Hassan Diab, has lingered on in a caretaker capacity.