Lebanon Outlook Stable

Moody’s Investors Service has downgraded Lebanon’s long-term issuer ratings to B3 from B2 and changed the outlook to stable from negative, zawya.com reported. The rating downgrade is based on Moody’s view that a B3 rating appropriately captures Lebanon’s credit risk profile. The ongoing erosion of Lebanon’s very weak government finances will continue to constrain the rating pending further clarity on whether recent and prospective fiscal reforms will be effective given the evolving political environment. While Lebanon’s external liquidity position continues to be strong, and banking liquidity ample, rising external imbalances, coupled with a weak growth outlook increase Lebanon’s vulnerability to external shocks. The stable outlook reflects the return to a fully-functioning government, which will support reform momentum going forward. Lebanon has a strong track record of servicing debt under stressed conditions, and its external buffers have continued to strengthen in recent years, supported by new deposits and the central bank’s operations. Lebanon’s local-currency bond and deposit ceilings are unchanged at Ba2.