S&P upgrades Lebanon's local currency rating to "CCC+"

Investing.com – S&P Global Ratings upgraded Lebanon’s long-term local currency sovereign credit rating from “CCC” to “CCC+” on Friday, while maintaining its foreign currency rating at “SD” (Selective Default).

The upgrade reflects an improved government ability to repay its local currency debt, supported by three consecutive years of fiscal surpluses and progress in reforms needed to access new International Monetary Fund (IMF) programs.

According to S&P data, Lebanon recorded an average overall government surplus of about 2% of GDP during 2023-2025 and has been meeting its local currency commercial debt obligations on time since 2020.

The agency has a “stable” outlook on the local currency rating, balancing ongoing economic reforms against significant policy challenges, including weak economic growth, limited public finances, security risks, and large-scale reconstruction needs.

S&P noted that the government has fully paid the interest owed on its local currency debt to the Central Bank of Lebanon (BdL), after suspending these payments from 2021 to 2023. Payments resumed in 2024, and all arrears are expected to be settled by 2025.

The sharp depreciation of the Lebanese pound has significantly reduced the proportion of local currency debt in total government debt, falling from about 85% of GDP in 2020 to less than 1% of GDP by the end of 2025.

Lebanon’s foreign currency rating remains at “SD,” after the government announced in March 2020 that it would stop paying its commercial foreign currency debts, which amount to approximately $31 billion in euro bonds.

Despite recent reform momentum, S&P expects no significant progress in sovereign debt restructuring over the next year, citing slow progress in banking sector reforms and the lack of implementation of deposit recovery strategies.

The government has made notable progress in reforms required for IMF approval, including passing the Bank Restructuring Law in July 2025 and the Bank Confidentiality Law in April 2025. The cabinet also approved the Financial Stability and Deposit Repayment Law in December 2025, but it still requires parliamentary approval.

S&P forecasts that, following an estimated 3.5% growth in 2025 and a 6.5% contraction in 2024, real GDP growth will be around 3.0%-3.5% annually from 2026 to 2029.

Since February 2024, the Lebanese pound has stabilized at 89,500 pounds per US dollar. With exchange rate stability, improved fiscal performance, and help from high inflation over the past six years, Lebanon’s net government debt is expected to decline from about 253% of GDP at the end of 2022 to 91% by the end of 2026.

The agency expects the current account deficit to decrease in the coming years but remain high at an average of 11% of GDP, below the 16% average during 2023-2025.

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