Moody’s Investors Service, the international rating agency, published on November 18, 2025 a rating action on the Government of Lebanon, maintaining the country’s “C” rating and stable outlook, a rating that reflects that losses for bondholders are likely to exceed 65%. According to Moody’s, and after nearly five years of political deadlock following the country’s default in March 2020, the election of a new President and the appointment of a new Government in early 2025 have paved the way for enacting key legislation. Some of the legislation that was passed in 2025 include a reform of the Banking Secrecy Law and the Bank Restructuring Law, bearing in mind that the Lebanese Government is working on finalizing the Financial Gap Law. The legislation will allow carrying out a comprehensive debt restructuring at the public sector, BDL, and commercial banks given their strong inter-relationship, bearing in mind that this restructuring exercise would restore debt sustainability, which is a condition to unlock IMF financial support. The report noted, however, that Lebanon is facing deep economic, financial, and social challenges that were aggravated by the prevailing geopolitical risks despite the implementation of a ceasefire.

Concerning the outlook, Moody’s commented that Lebanon’s rating would most likely remain the same until the debt restructuring exercise is completed given the magnitude of the macroeconomic, financial, and social challenges. The rating agency added that the local currency ceiling remained unchanged at “Ca”, reflecting the “very weak reliability and predictability of institutions and government action” as well as the extensive domestic & geopolitical risks. Moody’s added that the foreign currency ceiling also remained stable at “Ca”, reflecting the effective dollarization of the Lebanese economy amidst the foreign currency transfer & convertibility restrictions of depositors, which will most likely prevail according to the agency until a comprehensive debt restructuring takes place. The agency commented that given that the legislative groundwork is already in place, it expects that the restructuring could be announced soon and most likely after the Parliamentary, elections which are due in May 2026.

From another perspective, Moody’s commented that the sharp depreciation of the Lebanese Pound and high inflation levels that ensued following the “break” of the local currency peg against the US Dollar have “inflated away” the local currency denominated debt while the outstanding Eurobond debt of $31 billion has accrued more unpaid interest to attain $42 billion (127% of GDP in 2025). In addition, the rating agency estimated the Central Government’s debt burden at 148% of GDP in 2025 (down from 163.8% in 2024), 98% of which is foreign currency denominated. Moody’s noted that it expects the debt burden in 2026 to remain close to 2025 levels in the event debt restructuring does not see the light. In a related note, the rating agency stated that it expects real GDP growth to reach 2.5% in 2025 and 3.5% in 2026 (compared to an economic contraction of 7.5% in 2024) if the ceasefire agreement holds.

Moody’s revealed that it is unlikely that Lebanon’s rating would improve from “C” before the restructuring exercise given the previously mentioned challenges and the agency’s expectation of large losses. In addition, the rating agency noted that any upgrade in the country’s sovereign rating following the debt restructuring would depend on the speed of the fiscal and institutional reforms, the government’s revenue generation capacity, and the economy’s adjustment to a new growth model. Furthermore, Moody’s noted that another prerequisite condition that could trigger a rating upgrade is an improvement in debt dynamics’ key drivers such as economic growth, interest rates, and the generation of large primary surpluses in a way that would ensure debt sustainability in the future (which would decrease re-default risk).