A plaque from the Fitch rating agency. (Credit: Miguel Medina/AFP)
Fitch, one of the big three U.S. credit rating agencies along with Moody’s and Standard & Poor’s, said in a recent press release that it will no longer provide sovereign credit rating for Lebanon, which has been in default on its dollar-denominated debt since 2020. It also affirmed, until further notice, Lebanon’s Long-Term Foreign- and Local-Currency Issuer Default Ratings (IDR) at ‘Restricted Default’ (RD), which it has imposed in 2020.
Fitch justified its decision to remove Lebanon from the list of countries it monitors by pointing out that it “no longer has sufficient information,” in the absence of “national accounts” and “fiscal data” since 2021. Indeed, Lebanon’s Central Administration of Statistics (CAS) only recently published the national accounts for 2021, two years after finalizing those for 2020. They are public and accessible through its website. A spokesperson for CAS told L’Orient-Le Jour that the national accounts for 2022 could be published by autumn.
The latest official figures published by the Finance Ministry, with the exception of budget forecasts, date back to December 2021, Sabine Hatem, a senior economist and director of cooperation and partnerships at the Institute of Finance Basil Fuleihan, an agency affiliated with the ministry, told L’Orient-Le Jour.
Loss of qualified personnel
“The data we’re working with are those taken from the adopted budgets [i.e. those for 2022 and 2024, as the 2023 budget is still a draft], as well as those collected from the Department of Public Expenditure, which do not cover all financial flows, particularly cash flows,” said the economist. The Finance Ministry lost a significant proportion of its qualified staff since the start of the crisis, during which civil service salaries collapsed, in line with the value of the lira, and have yet to return to how they were before 2019.
Fitch last updated its rating for Lebanon last summer. The agency had maintained Lebanon’s long-term and short-term foreign currency debt (Eurobonds) at “RD,” just one notch before total default, while creditors are still waiting for a restructuring of Lebanese debt.
This rating has remained unchanged since the government defaulted on its Eurobond payments. The debt was worth over $30 billion before its value collapsed following the default. According to Marwan Barakat, head of research at Bank Audi, the average price of Eurobonds on the secondary market is currently 6.75 cents, which has not changed for some time now. This debt is partly held by Lebanese banks and the Banque du Liban (BDL).
In its latest rating, Fitch indicated that the Eurobond restructuring process is still at a standstill, to justify the “RD” for Lebanon’s foreign debt. For the local currency, the agency pointed out that “the government has not resumed interest payment on BDL’s holdings of local-currency securities.”
It added that “local-currency debt to private creditors is still being serviced. Authorities have not requested a local-currency debt restructuring.”
The country is rated “C” (default with little prospect for recovery) by Moody’s, which changed the outlook to “stable” in December. In early 2024, S&P Global Ratings affirmed its ‘SD/SD’ (selective default) long- and short-term foreign currency ratings on Lebanon.
This article was originally published in L'Orient-Le Jour and translated by Joelle El Khoury.