Moody’s Investors Service, the international rating agency, published on September 14, 2021 an issuer comment on the recent government formation in Lebanon whose priorities were highlighted by the Prime Minister as tackling the COVID-19 pandemic, implementing general reforms to unlock donors’ assistance and preparing for the looming parliamentary elections. However, Moody’s commented that the government formation only serves as a first step towards halting the country’s economic collapse, restructuring its debt and shifting towards a more sustainable growth model that promotes domestic production. The rating agency commented that Lebanon’s already dire situation has been amplified by the depletion of its foreign exchange reserves, with the IMF requesting the implementation of certain reforms before releasing any emergency funding. Said reforms, as per Moody’s, include governance reform, initiating the comprehensive audits of BDL and state-owned enterprises, restoring the solvency of public finances via a comprehensive debt restructuring, eliminating the multiple exchange rates and implementing official capital controls. Moody’s considered that the financial recovery plan prepared by Mr. Diab’s government could form the starting point for any reform process, bearing in mind that said plan was approved to  a great extent by the IMF. The plan back then estimated Lebanon’s net external financing needs at $10 billion over a five-year period, yet Moody’s uncovered that said funding needs have increased since then, while pointing also out that Lebanon would be benefitting from some $1.135 billion in SDRs from the IMF on the short-term. The agency reminded that the aforementioned plan estimated losses in the financial system at LBP 241 trillion, assuming an exchange rate of LBP 3,500 per USD, to be allocated over different stakeholders, implying that bondholders would suffer a loss of over 65%, justifying the C rating. The agency added that Lebanon has been experiencing one of the worst global economic crises over the past century with GDP contracting from $55 billion in 2018 to $33 billion in 2020,  the local currency depreciating by more than 90%, eroding as such consumers’ real purchasing power, and poverty rates doubling from 42% in 2019 to 82% in 2021. In addition, Moody’s warned that the country’s dismal track record in implementing reforms could risk jeopardizing the government’s efforts to reverse the economic situation. Finally, Moody’s commented that it could assign Lebanon a higher rating in the event greater debt sustainability is achieved coupled with a return to economic growth in addition to achieving price stability and recurrent primary surpluses.