BLOOMBERG/HASAN SHAABAN

ECONOMY

S&P Global downgrades Lebanon sovereign rating, outlook negative

SHARE THIS ARTICLE
The recent temporary but prolonged bank closures and unofficial foreign currency transfer restrictions raise questions about the sustainability of the exchange rate regime, further eroding confidence.
SUNDAY 17, NOVEMBER 2019

S&P Global Ratings has downgraded Lebanon’s long- and short-term foreign and local currency sovereign credit ratings to ‘CCC/C’ from ‘B-/B’, with a negative outlook is negative due to the diminishing confidence in governance and the economy.

In a statement, S&P said that the recent temporary but prolonged bank closures and unofficial foreign currency transfer restrictions raise questions about the sustainability of the exchange rate regime, further eroding confidence.

Additionally, the rating agency said that the negative outlook reflects the risk to the sovereign's creditworthiness from rising financial and monetary pressures tied to widespread protests and the resignation of the government.

S&P stated that there is a likelihood that it can lower Lebanon’s ratings within six to 12 months in light of the authorities’ response to acute financial, economic and social pressures as well as its effectiveness in restoring deposit or confidence.

Nationwide protests driven in part by the worst economic crisis since the country’s 1975-1990 civil war have shut banks and paralysed the country, limiting the ability of many importers to purchase from abroad.

Similarly, Saad al-Hariri quit as prime minister on 29 October 2019 in the face of the protests against ruling politicians who are blamed for rampant state corruption.

Depositor confidence has eroded further following recent political developments, prolonged social unrest as well as protracted bank shutdowns and individual banks reportedly placing some restrictions on foreign-exchange transfers and operations.

According to S&P this reflects rising pressure on Lebanese banks' liquidity and continued outflows will likely weigh on the Banque du Liban's (BdL's) foreign exchange reserves. According to the Institute of International Finance, capital outflows reached $3 billion in the first nine months of the year and a recovery hinges on political stability and implementation of deep reforms to restore confidence.

Last week, S&P Global also downgraded its long-term issuer credit ratings on Bank Audi, Blom Bank and Bankmed to ‘CCC’ from ‘B-‘, due to the large maturity mismatches on the banks’ balance sheets limiting their flexibility to respond to major deposit outflows in times of liquidity stress.

TAGS: BANK AUDI S&P GLOBAL RATINGS JUNK TERRITORY LEBANON PROTESTS BLOM BANK BANKMED
Print Friendly Version


RECOMMENDED NEWS


ECONOMY

sample
2 months ago

BRANDS MAGAZINES LATEST EDITION


CPI Financial was established in Dubai in 1999 to meet the needs of an ever-expanding financial community, offering a comprehensive portfolio of market-leading products and services tailor-made for the banking and financial services sectors.


Subscribe to our News Letter

Subscribe

© 2018 CPI Financial. All rights reserved.

No part of this website may be reproduced or used in any form of advertising without prior permission in writing from the editor.