BEIRUT: Lebanon is off to the races to get its finances in order after Moody’s warned of Banque Du Liban’s waning foreign reserves and the central bank's ability “to maintain confidence in the peg and preserve financial sector stability.”
According to Moody’s estimates, Lebanon’s Central Bank has a usable foreign exchange buffer of about 6 to 10 billion dollars left to draw from, with all eyes now turning to the government’s ability to secure financing in the near term.
"According to Moody's estimates, the BdL has a usable foreign exchange buffer of about $6-10 billion left to draw from (based on the net foreign assets accumulated in the past and when adjusting the stock of foreign exchange reserves for banks' negative net foreign asset position) in order to maintain confidence in the peg and preserve financial sector stability. This compares with the government's foreign currency debt service at about $5 billion in 2020, in addition to the upcoming $1.5 billion November 2019 maturity," Moody's report said.
Moody's said Lebanon's credit rating of Caa1 is under review, with any future decision based on the government’s progress in adopting the 2020 budget within the constitutional deadline and the extent to which that unlocks the widely anticipated CEDRE investment package or other means of support from Gulf states.
The package, which would boost confidence and ease liquidity risks, has been put on the backburner as reform promises have yet to be met, while officials implemented half measures aimed at reducing the budget deficit.
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