NICOSIA, 22 July 2006 — Capital Intelligence dropped yesterday the outlook on Lebanon’s B-minus long-term sovereign credit rating to negative from stable, in response to the escalating crisis.
The rating agency said that the downward revision reflects the considerable uncertainty concerning the duration and intensity of military attacks and the possible impact on the economic and political stability of Lebanon.
In line with this action, the outlook on the B-minus long-term foreign currency ratings of six Lebanese banks Bank Audi-Audi Saradar Group, BBAC, BLOM Bank, Byblos Bank, Credit Libanais, and Fransabank has also been revised to negative.
The rating agency said that large government and external financing needs and a public sector debt stock of 175 percent of gross domestic product (GDP), of which over 50 percent is in foreign currency, leaves Lebanon highly vulnerable to political and economic shocks.
The government has a limited funding base and depends on the domestic banking sector for the bulk of its financing needs.
The country has, however, proved remarkably resilient to past shocks, and Capital Intelligence would expect a crisis of limited duration to not significantly affect short-term repayment capacity, although it may have longer-term implications for economic activity and the public finances.