| 03 Jul 2009 |
|
Capital intelligence raises Lebanon's rating to stable
- Text size
03 July 2009
LLIMASOL: Capital Intelligence, the international credit rating agency, on Thursday announced that it has raised Lebanon's long-term foreign and local currency ratings to 'B' from 'B-' (B minus). The outlook is stable. The long-term foreign currency ratings of six Lebanese banks that were constrained by the sovereign's rating - Bank Audi-Audi Saradar Group, BBAC, BLOM Bank, Byblos Bank, Credit Libanais, and Fransabank - have also been raised to 'B' with a stable outlook.
The upgrade in the sovereign's ratings primarily reflects Lebanon's improved international liquidity position but also takes into account the reduction in near-term financing risks resulting from increased investor confidence and banking sector liquidity. Underlying the improvement in the sovereign's credit profile is the return of relative political normality over the past year, evidenced most recently by peaceful and undisputed parliamentary elections in June.
The decrease in political risk perceptions coupled with favorable interest rate differentials has contributed to a pickup in financial inflows and greater demand for local currency denominated deposits, enabling the central bank to almost double its foreign exchange reserves between end-2007 and April 2009 to $19 billion (equivalent to 60 percent of GDP.)
Official reserves are currently about four times as high as annual government foreign currency debt service and, combined with the liquid foreign assets of the commercial banks, cover more than 70 percent of short-term external debt.
"Although the government's projected gross financing requirement for 2009 is high at about 45 percent of GDP, the majority of foreign currency amortization has already been covered through a Eurobond exchange in March and strong deposit inflows should enable the government to tap the market again later in the year," the agency said.
The government benefits from a largely passive and 'friendly' investor base dominated by local banks with large dollarised deposit bases relative to the size of the economy.
The banking system has been little affected by the global financial crisis, confidence in the system is high and bank deposits have been remarkably 'sticky' in the face of economic and political shocks over the past decade.
The authorities also have good relations with international donors, notably Gulf countries, who have proven willing and able to provide timely financial assistance at times of economic stress.
The sovereign's ratings remain constrained by its weak public finances and political risk factors.
The government is the most indebted of all sovereigns rated by CI, with gross debt equivalent to 162 percent of GDP or 672 percent of budget revenue at end-2008, and the debt stock is unfavorably structured, resulting in heavy exposure to refinancing, interest rate and exchange rate risk.
The budget deficit is unsustainably high at around 10 percent of GDP and fiscal flexibility is constrained by weakness in revenue mobilization and substantial expenditure rigidities, with interest expense alone accounting for more than one-third of public spending.
Progress on the reforms needed to reduce the large debt overhang and raise potential economic growth has been slow. - The Daily Star
© Copyright The Daily Star 2009.
Zawya is a distributor (and not a publisher) of content supplied by third parties and subscribers. Any opinions, advice, statements, services, offers, or other information or content expressed or made available by those third parties, including information providers, subscribers or other users of the Service, are those of the respective author(s) or distributor(s) and not of the Company. The Company neither endorses nor is responsible for the accuracy or reliability of any opinion, advice or statement made on the Service by anyone other than authorized Service employee spokespersons while acting in their official capacities. The Company is not responsible for any infringement of intellectual property rights or breach of any applicable law or regulation, including regulation in relation to financial services or the distribution of financial products, defamation, data protection, telecommunications (including regulations relating to excessive use, spamming or other abusive activities) or obscene, offensive or illegal content). Under no circumstances will the Company be liable for any loss or damage caused by a member's reliance on information obtained through the Service. It is the responsibility of member to evaluate the accuracy, completeness or usefulness of any information, opinion, advice or other content available through the Service. Please seek the advice of professionals, as appropriate, regarding the evaluation of any specific information, opinion, advice or other content.
Read the full Member Agreement
http://www.zawya.com/legal/NewsLetter.cfm?name=disclaimer
Post a Comment
1.1 Contain any material which is libelous or defamatory of any person, is obscene, offensive, hateful or inflammatory or causes damage to the reputation of any person or organisation.
1.2 Promote sexually explicit material, violence, discrimination based on race, sex, religion, nationality, disability, sexual orientation or age or any illegal activity.
1.3 Be made in breach of any legal duty owed to a third party, such as a contractual duty or a duty of confidence.
1.4 Be threatening, abuse or invade another's privacy, or cause annoyance, inconvenience or needless anxiety.
1.5 Be used to impersonate any person, to misrepresent your identity or affiliation with any person, or be likely to deceive any person.
1.6 Give the impression that they represent Zawya.
1.7 Advocate, promote or assist any unlawful act such as (by way of example only) copyright infringement or computer misuse.