Lebanon: Uncertain Outlook

Ratings agency S&P blames “ongoing political uncertainty” for the Lebanese central bank’s “unusual and unsustainable financing engineering.” In a 31 August ratings update, S&P re-affirms Lebanon’s long-term sovereign rating at B- with stable outlook, six notches below investment grade.

“The general government debt burden will continue to rise from already high levels through 2021,” S&P says, forecasting end-2018 net public debt of 142% of GDP up from 137% at end-2017.

On the other hand “deposit inflows will remain sufficient to support Lebanon’s large twin [budget and external] deficits over the next 12 months,” S&P predicts.

Lebanon’s politicians are struggling to cobble together a new government after the May parliamentary elections. The government’s debt-servicing ability depends on the financial sector’s willingness and ability to continue subscribing to government securities. Lebanon needs political stability if it is to take advantage from the loans and grants of some $11.5bn pledged at the Cedre conference in Paris in April to finance the reconstruction of its rundown infrastructure ( MEES, 13 April ). The disbursement of these funds is contingent on the implementation of structural reforms and a functioning government. (CONTINUED - 187 WORDS)