The exit of 9.5 billion dollars from Lebanon within two years..a report reveals

The exit of 9.5 billion dollars from Lebanon within two years..a report reveals
The exit of 9.5 billion dollars from Lebanon within two years..a report reveals

I wrote “Middle eastExpectations for the executive and legislative authorities’ agreement on a unified drafting of the draft law restricting capital transfers in hard currencies (Capital Control) outside Lebanon coincided with a report issued by the global rating agency (Moody’s) in which it suggested that about $9.5 billion of bank deposits would exit over more than two years. From the monetary and financial crises that hit the country.

Moody’s declined to make any usual (negative, positive, stable) anticipation on the medium-term horizon, given that the rating given by Lebanon was at (C)It is the lowest possible assessment, and is based on the significant deterioration the country is witnessing in the overall economic, financial and social conditions. She explicitly indicated that even if Lebanon reached to restructure its debts and banking sector, it would need a long period of time before rehabilitating its position to allow it to be raised from this rank. Also, any improvement in the rating is associated with the development of some factors to ensure the sustainability of the debt. These factors include recording economic growth, securing financing, and recording sustainable primary surpluses..

In the painful economic and social consequences of the economic and political deterioration in Lebanon, a shocking sign emerged of a sharp contraction of the domestic product from its highest levels at $55 billion at the end of 2018, according to IMF estimates, to about $20 billion in 2020, with anticipation of the continued decline. to about $18 billion this year. While the actual poverty rate increased from 42 percent in 2019 to 82 percent in 2021.

The agency indicated that the international financial institutions are willing to provide financial aid to Lebanon during the restructuring process, provided that some reforms are implemented, which include restoring the solvency of the public finances and the banking sector through debt restructuring, passing legislation related to restrictions on transfers, eliminating multiple exchange rates, and conducting a comprehensive audit of the Banque du Liban and state institutions..

In terms of financial strength, Moody’s report noted the significant deterioration in the debt-to-GDP ratio, which Moody’s expects to exceed 200 percent during 2021 and to remain high in the coming years in the event of no debt restructuring. Between 140 percent and 170 percent in 2023.

In this context, the report indicated that the rise in the debt-to-GDP ratio is caused by the significant deterioration in the exchange rate, as the foreign-currency-debt-to-GDP ratio has significantly developed as a result of the drop in GDP at current prices..

The agency pointed out that its expectations revolve around an exchange rate higher than that traded in the parallel market, as the adoption of the parallel market exchange rate will raise the debt ratio of GDP to 300 percent in 2020 and 250 percent in 2021, according to estimates. Also, the liquidity risk is high due to the depletion of Banque du Liban’s reserves. She also pointed to the resilience of remittances from abroad during the past year, which helped reduce the current account deficit, noting the significant decline in tourism revenues.

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