Moody’s Investors Service, the international rating agency, completed on May 14, 2026 a periodic review of Lebanon’s ratings, where it indicated that the current “C” rating reflects that losses for bondholders are likely to exceed 65%. The agency mentioned that the renewal of hostilities in the region has aggravated macroeconomic, fiscal and social pressures, thereby highlighting the very weak economic resilience of Lebanon. According to Moody’s, the recent conflict has resulted in a sizeable economic shock, with real GDP projected to contract by 14% in 2026 as a result of population displacement, the collapse of tourism, disruptions to agriculture and manufacturing, as well as massive infrastructure destruction. The rating agency also expects that the decline in government revenues that would ensue, along with the rising social and reconstruction needs will aggravate fiscal balances and increase the reliance on FX reserves and conditional external support, commenting that the persistent regional tensions threaten to worsen Lebanon’s already feeble balance of payments position. Furthermore, the agency noted that a temporary extension of the ceasefire and resumption of IMF discussions concerning a potential quick financing could provide some short-term comfort by supporting liquidity and fiscal space although they do not address Lebanon’s grounded structural weaknesses namely the sovereign default, the lack of a comprehensive debt restructuring, as well as several institutional & governance challenges. Moody’s commented that Lebanon’s rating is unlikely to change unless a comprehensive debt restructuring is completed given the size of the macroeconomic, financial, and social challenges. According to Moody’s, any improvement in Lebanon’s sovereign credit rating following the debt restructuring process would hinge on the speed and effectiveness of fiscal and institutional reforms, the government’s capacity to strengthen revenue collection, and the economy’s transition to a new growth model.

From another standpoint, it is worth clarifying that a rating by the agency takes into consideration four major elements, namely, economic strength, institutional and governance strength, fiscal strength, and susceptibility to event risk. Lebanon scored “caa1” in economic strength given the steep economic contraction and “ca” on the institutional and governance strength front, reflecting the anemic fiscal policy effectiveness. With respect to fiscal strength, the former was assessed as “ca”, a fact that portrays the government’s highly leveraged balance sheet that could result in large losses for creditors in the event of default. Lastly, Lebanon scored “ca” in susceptibility to event risk driven by the country’s liquidity risk & external vulnerability risk, added the high exposure of the banking sector to sovereign debt.