Report: Moody’s ‘Analytical’ Report Didn’t Classify Lebanon

After Moody’s Investor Service report that Lebanon risks debt rescheduling despite budget, it has been noted that the report was rather “analytical” and did not classify the country, al-Joumhouria daily said on Friday.

Financial sources who spoke on condition of anonymity told the daily: “Moody's report is rather analytical and did not credit rate Lebanon. Rating will take place over the next two months by Moody's and Fitch Ratings during a planned visit to Lebanon to assess the economic and financial situation and publish the credit opinion on the 2018 results, and on the draft budget for 2019.

“Standard & Poor's (Financial services company) will review the rating in August,” they said.

According to Moody's, the ratio of public debt to Lebanon's GDP is the highest in comparison with the countries that have been classified. The interest rate of total revenues is 46.9%, the highest percentage of all countries, despite the austerity measure taken by the government to control the state of public finances in the draft budget.

Moody's said the slowing capital inflows and weak deposit growth, increases the risk of a government response that will include a debt rescheduling or another liability management exercise that may constitute a default.

In the context, a banking expert told the daily that the financial and economic situation of Lebanon “is critical.” However, he stressed that “restructuring public debt or default is unlikely despite all the data.”

“The use of these terms is not accurate at this stage,” he said. "The majority of foreign debt to Lebanon is borne by Lebanese banks and some parties, as opposed to 15% of non-Lebanese parties,” he added.

Moody's is likely to raise Lebanon's credit rating if the government is likely to take debt management measures in the next few years, according to the newspaper.