S&P lowers Lebanon’s sovereign rating

Protests across the country have entered their second month

Published on 17 November 2019

S&P Global Ratings has lowered its credit ratings on Lebanon as protests across the country enter their second month.

The long and short-term foreign and local currency sovereign credit ratings have been lowered to CCC/C from B-/B. The ratings agency has also revised its transfer and convertibility (T&C) assessment for the country to CCC from B-, and adds that the outlook is negative.

S&P Global Ratings said it lowered Lebanon’s sovereign rating because there is diminishing confidence in the country’s governance and economy and this has led to a reversal in bank deposit inflows, which have historically financed Lebanon’s elevated fiscal and external deficits.

Bank closures and unofficial foreign currency transfer restrictions have also raised questions about the sustainability of the exchange rate regime, further eroding confidence.

The outlook for the economy means that the Lebanese government would likely need external donor support, or a significant domestic reform package, to continue servicing its general government debt, which is estimated at 148 per cent of GDP.

In late October, Lebanon’s Prime Minister Saad Hariri announced that he intends to hand in his resignation.

Lebanon caps interest rates

Lending and deposit rates will be capped at 5 per cent for foreign currencies and 8.5 per cent for Lebanese pounds

Published on 5 December 2019

The Banque du Liban has capped Lebanon interest rates as pressure builds on the Lebanese economy after nearly two months of political protests across the country.

Lebanon’s central bank said on 4 December that lending and deposit rates will be capped at 5 per cent for foreign currencies and 8.5 per cent for Lebanese Pounds for six months.

The new measures will reportedly apply to all new deposits and those renewed from 4 December.

Interest rates had been running at about 15 per cent.

The Banque du Liban will also pay half of the interest on foreign exchange deposits in local currency to reduce the pressure on dollar reserves.