Moody’s Investors Service, a US-based organisation, has maintained its “C” rating on Egypt due to the country’s severe economic distress, with bondholder losses expected to surpass 65%.
The rating reflects the losses incurred due to Lebanon’s ongoing default since March 16, 2020, according to Moody’s.
Its frail institutions seem unable to confront the nation’s deepening economic, financial, and social crises.
Due to the high probability of large losses for private creditors, the agency also modified the country’s outlook from no outlook to stable, reflecting its expectation that the “C” rating will stay in place for the foreseeable future.
The agency also anticipates a volatile economic environment to endure, because of persistent political impasse and weak institutions.
A spike in inflation that reached a startling 215.4% by the end of October 2023 compared to the same period the previous year, coupled with the collapse of the national currency in the parallel market, contributed to the economic distress.
The lack of significant steps toward realistic fiscal and economic policy reforms casts doubt on the viability of official external funding support to go along with a government debt restructuring in the near future.
A deepening Israel-Hamas conflict has the potential to reverse recent gains in the tourism industry and further undermine economic activity in Lebanon, a country beset by political impasse and weak institutions.
While the foreign currency ceiling stays at the same level, the agency also discovered that the local currency ceiling is still at “Ca,” indicating that its obligation is almost in default.
Lebanon’s ESG Credit Impact Score revealed a significantly lower rating than it would have otherwise gotten when taking governance, social, and environmental factors into account.
Reduced ability to withstand social and environmental risks is a result of governance limitations, falling wealth, and an overburdened government balance sheet.
The nation has long-standing problems with solid waste disposal and over 25% of the population has access to contaminated drinking water. In addition, there are water shortages that are expected to worsen if appropriate policies are not put in place.