Moody’s Investors Service, the international rating agency, published on May 21, 2026 a credit opinion on the Government of Lebanon, maintaining the country’s “C” rating and stable outlook, a rating which reflects that losses for bondholders are likely to exceed 65%. The rating agency cited a set of credit strengths and challenges underlying Lebanon’s rating, with the former pivoting around the commitment of international donors to support the country conditional upon the implementation of the IMF reform program added the renewed reform momentum under the newly elected President and appointed Government. On the other hand, credit challenges included the propagation of a harsh economic, financial & social crisis, a severely weak institutional & governance strength (thereby impeding reform implementation), and the sizeable human displacement & infrastructure damage resulting from the war. In parallel, Moody’s stated that the stable outlook indicates that Lebanon’s rating is likely to remain unchanged over the near future. The agency also mentioned that the country’s rating is unlikely to change unless fiscal consolidation and structural reform implementation are undertaken on the one hand and an improvement in revenue generation capacity & the country’s adjustment to a new growth model are achieved on the other hand so as to guarantee debt sustainability in the future.

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 since 2019 and the collapse of its previous growth model. These challenges have been further intensified by population displacement and damage to infrastructure caused by the outbreak of hostilities since September 2024. On a positive note, the agency pointed out that remittances and travel-related income from the Lebanese diaspora are aiding in supporting income levels. On the institutional and governance strength front, Lebanon was assigned a score of “ca” on the back of the very weak quality of institutions and the ongoing default since March 2020. In addition, the rating reflects a frail governance environment characterized by an anemic fiscal policy effectiveness (which is constrained by the slowdown in economic activity and revenue generation), with monetary policy also being constrained by the “effective dollarization of daily transactions”. With respect to fiscal strength, the former was assessed as “ca”, a fact that portrays the Government’s high indebtedness level (debt at 144% of GDP in 2025) that could result in large losses to 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.

Moody’s added that recent diplomatic efforts led by the United States sought to advance a more durable peace and security framework between Israel and Lebanon through talks held in mid-May. The discussions came amid continued reports of ceasefire violations, highlighting the fragile security environment and ongoing geopolitical risks. While the negotiations may help prevent further escalation, the possibility of renewed conflict remains significant, posing continued threats to Lebanon’s economy, investor sentiment, and humanitarian conditions. In light of the intensified regional conflict and recent local hostilities, Lebanon’s economic outlook has deteriorated sharply with real GDP expected to contract by 14% in 2026 according to Moody’s. In details, the renewed violence has displaced more than one million people, disrupting labor markets, weakening consumer demand, and severely affecting productive sectors such as agriculture, manufacturing, and construction through damage to infrastructure, capital, and supply chains. Service industries, including tourism, healthcare, and education, have also suffered from the broader economic slowdown. The country remains heavily dependent on imports, which are partially offset by tourism receipts and remittance inflows, while adding that these foreign currency inflows may weaken because of regional instability, rising oil prices, and potential disruptions to diaspora transfers. Although discussions with the IMF regarding up to $1 billion in emergency financing may provide temporary fiscal relief and support urgent social spending, such assistance alone would not resolve Lebanon’s structural economic weaknesses. It added that sustainable recovery will require comprehensive debt restructuring, macroeconomic stabilization measures, and long-term institutional reforms.