Standard & Poor’s Global Ratings affirmed on August 31, 2018, its B/B- long and short-term foreign and local currency sovereign credit ratings on Lebanon, pointing out that the outlook remains stable.
The stable outlook reflects the agency’s expectation that continued deposit inflows to the financial system will remain sufficient to support the government’s borrowing requirements and the country’s external deficit over the next 12 months.
“Ongoing political uncertainty has driven the Banque du Liban to conduct unusual and unsustainable financing engineering operations to meet the government external financing needs and maintain confidence in the currency peg,” the agency said, stating that it anticipates that the general government debt burden will continue to rise from already high levels through 2021, but that deposit inflows will remain sufficient to support Lebanon’s large twin deficits over the next 12 months.
The agency added that they could lower the ratings on Lebanon if:
- They saw the government was unable to access the international debt capital markets for an extended period, perhaps evidenced by further Banque Du Liban financial engineering transactions.
- The political and economic situation deteriorated, leading to deposit outflows or slower deposit growth rates and a level of foreign currency (FX) reserves that would challenge the country’s ability to meet its debt-servicing requirements.
- Confidence in the monetary financial institutions or currency peg weakened.