Moody’s has downgraded today Lebanon’s credit rating to Caa2 after having downgraded it to Caa1 nine months ago. “Moody’s said the decision to cut Lebanese debt from Caa1 to Caa2 “reflects the increased likelihood of a debt rescheduling or other liability management exercise that may constitute a default”. The downgrade comes just after the country’s central bank ordered lenders to boost their capital buffers by some $4bn by year’s end and $4bn by next June, in preparation for further downgrades.” [Source]
Both Caa1 and Caa2 fall in the speculative category of Moody’s rating scales. We’re two spots away from being lowest rating which is C and means there’s little prospect for recovery of principal or interest. In other words, the country defaults on its debts.
Nine months ago, they were telling us we’re at risk of default unless we form a government and start taking some fiscal consolidation measures that unlock the CEDRE public investment package. Now, we’re again with no government and those in power are still wasting time instead of forming quickly a government of specialists to handle the next phase.