“Moody's Investors Service” revealed that the slowdown in capital flows to Lebanon and the decline in deposit growth boosted the possibility of rescheduling its debt or taking other steps that could lead to default, despite the financial control measures in 2019’s draft budget.
Moody's said that although the draft budget of the FY 2019 included financial control measures, the slowdown in capital flows and the weak deposit growth, makes the government to likely take measures including debt rescheduling or another liability management measure that could constitute default under our definition.
In response to a question about Moody's credit analysis, Ali Hassan Khalil, the Lebanese Finance Minister stressed that "things are under control."
The draft budget aims to reduce the deficit to 7.6 percent of GDP from 11.5 percent last year, with Lebanon's leaders warning that the country is facing a financial crisis without reforms. The measures to reduce the deficit include raising the interest payments tax to 10 per cent from seven per cent, reducing debt service costs by issuing soft-rate treasury bonds and imposing a two per cent import tax, which is contested by MPs in parliament.
Source: (Asharq Al-Awsat newspaper, Edited)
