Fitch Ratings downgraded the long-term foreign-currency issuer default rating of Lebanon to CCC from B-, while S&P Global Ratings affirmed the B-/B long- and short-term foreign and local currency sovereign ratings.
Fitch's downgrade considers the intensifying pressure on the country's financing model, which raises risks to the government's debt servicing capacity. Downward pressure on banking sector deposits and central bank foreign reserves and increasing dependence on unorthodox measures by the central bank to attract inflows illustrate increased stress on financing, the rating agency noted.
S&P's affirmation reflects its view that, despite a significant decline in investor confidence, the central bank's usable foreign exchange reserves, estimated at about $19 billion at the end of 2019, remain sufficient to service government debt in the near term.
S&P's negative outlook reflects that ratings could be cut in the next six to 12 months if banking system deposits and the central bank's foreign exchange reserves continue to fall, likely reflecting a weak policy environment and impaired market access. Fitch typically does not assign outlooks for sovereigns with a rating of CCC or below.
S&P Global Ratings and S&P Global Market Intelligence are owned by S&P Global Inc.
