The international investment bank J.P. Morgan recently issued a note titled “Lebanon: Crises don’t Age Well” discussing the latest developments related to the Lebanese economy and its debt crisis. The investment bank referred to the massive explosion at the Beirut Port, while also citing officials’ estimates of damages at around $15 billion, bearing in mind that initial estimates hovered between $3 and $5 billion. J.P. Morgan also pointed out that the explosion reignited protests which ultimately led to the resignation of the Lebanese Government in addition to nine MPs. The publication mentioned that numerous countries have offered assistance to Lebanon in the aftermath of the explosion, with total pledges ranging between $300 million and $400 million and main contributors including the European Commission ($74.2 million), Qatar ($50 Million), Kuwait ($41 million) and France ($35.3 million). J.P. Morgan, however, uncovered that access to larger support (including $10-15 billion from the IMF) is conditional on Lebanon’s fulfillment of several conditions. Said conditions include addressing public finances and promoting debt sustainability, reaching a bail-in agreement by the different concerned parties to allocate and bear the losses of the banking system, passing legislation to implement capital controls, the elimination of the multiple exchange rates phenomena and trimming the losses of state enterprises. J.P. Morgan also commented that the port explosion will deal a further blow to an already shattered Lebanese economy, downwardly revising in this regard its year 2020 growth estimates for Lebanon by 300 basis points to -17% from -14% previously. Always on the same front, J.P. Morgan anticipated economic activity to drop initially, only to be boosted at a later stage as a result of the reconstruction efforts. Delving further into this topic, J.P. Morgan revealed that the Lebanese economy has been hardly hit by the COVID-19 pandemic, with lockdown measures limiting FX revenues, leading to a spike in the parallel market exchange rate to LBP 7,700 per USD in July up from LBP 2,110 per USD as at end of year 2019. On the budgetary front, the contraction in interest payments and EDL transfers (as a result of the lower oil prices) outweighed the sizeable drop in revenues resulting from lower consumption, corporate profitability and interest rate levels to trim the budget deficit. J.P. Morgan also pointed out that the implementation of the government’s recovery plan has been delayed by the pandemic and the political disputes surrounding the plan, with the recent resignation of the government putting its implementation into question. J.P. Morgan commented that the government’s target debt to GDP ratio implies a 70% haircut on Eurobonds and a 40% haircut on treasury bills. J.P. Morgan added that it expects the recovery prices for the Eurobond portfolio to range between 14 and 23, a low figure resulting from the large targeted haircut, especially when compared with other sovereign haircuts. Said sizeable haircut however would put the debt to GDP ratio on a downward path to dip below the 100% threshold by the year 2024, down from around 150% currently. Always in the same vein, J.P. Morgan commented that the relatively low foreign ownership of FC sovereign debt limits the bargaining powers of foreign bondholders and accordingly their ability to contest the large proposed haircut.