Standard Chartered recently launched a report titled “Lebanon – This time is different” where it estimated the recovery value of Lebanese Eurobonds under various scenarios. It  first unveiled that Lebanese Eurobonds were the best performers on a year to date basis amongst emerging markets’ sovereigns backed by implementation of reforms and a better regional security situation. The bank commented, however, that Eurobonds’ performance in October was volatile, as progress on reform implementation and state monopoly over arms stalled. Standard Chartered remains optimistic, however, that border tensions will ebb after the recent ceasefire in Gaza, allowing the government to put more focus on reform implementation, citing in this regard the ratification of the Financial Gap Law as a stepping stone towards paving the way for a Staff-Level Agreement (SLA) with the IMF before the May 2026 parliamentary elections. Standard Chartered commented, however, that the above timeline is bound by risks and has accordingly prepared three scenarios of deposit repayment, macroeconomic indicators and eventual bond recovery over the 2027-2031 period.

Under the base case scenario, real GDP growth is expected to average 7% per annum (p.a.) over the 2027-2031 period accompanied by a fiscal surplus to GDP ratio of 2.5%-4.0%. In addition, Standard Chartered assumes the government will contribute $17.6 billion to deposit repayment, paving the way for the repayment of up to $200K  of deposits (with the remaining amount being written down or bailed in). Finally, under the base case scenario, Standard Chartered estimated the recovery value on Eurobonds at 22 cents on the dollar after taking into account a 70% haircut on Eurobonds principal and a 50% haircut on Past Due Interest (PDI).

The bull case scenario assumes higher levels of GDP growth (average of 9% p.a.) and a fiscal surplus to GDP (4%), with the government’s contribution to deposit repayment increasing to $22.1 billion and the deposit repayment threshold improving to $500K (aided by cash generated through the partial collateralization of gold reserves). The bull case scenario arrives at a Eurobonds’ recovery value of 36 cents on the dollar.

The bear case scenario on the other hand forecasts a timid average real GDP growth of 3% p.a. and a fiscal breakeven. Government’s contribution to deposit repayment would be limited at $12.0 billion and the deposit repayment threshold & recovery value of Eurobonds standing at $100K and 11 cents on the dollar respectively.