Lebanon government formation positive for credit rating: Moody's

The report did warn, however, that risks remained elevated given that very weak economic growth will challenge the government’s fiscal consolidation efforts.

  
Lebanese Parliament Speaker Nabih Berri, Lebanon's President Michel Aoun and resigned Prime Minister Saad al-Hariri meet ahead of a new government announcement at presidential palace in Baabda, Lebanon January 31, 2019.

Lebanese Parliament Speaker Nabih Berri, Lebanon's President Michel Aoun and resigned Prime Minister Saad al-Hariri meet ahead of a new government announcement at presidential palace in Baabda, Lebanon January 31, 2019.

REUTERS/Mohamed Azakir

LONDON- The formation of a new government in Lebanon is positive for the country's credit rating, Moody's said on Monday, as it should help unlock a $11 billion, five-year international support package offered last year.

"The announcement is credit positive because we expect that the new government will implement necessary fiscal reforms to unlock the $11 billion five-year investment package committed by international donors," Moody's analysts said in a new report.

The report did warn, however, that risks remained elevated given that very weak economic growth will challenge the government’s fiscal consolidation efforts.

"Lebanon’s fiscal and external positions will remain weak as long as a lack of investor confidence continues to weigh on deposit growth, thus increasing the risk that the government’s response will include a debt rescheduling or other liability management exercise that may constitute a default."

Moody's currently rates Lebanon Caa1, which is a warning the country has substantial debt risks.

(Reporting by Marc Jones; editing by Helen Reid) ((marc.jones@thomsonreuters.com; +44 (0)207 542 9033; Reuters Messaging: marc.jones.thomsonreuters.com@reuters.net Twitter @marcjonesrtrs))

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