According to the Ministry of Finance’s (MoF) latest debt report, Lebanon’s gross public debt increased annually by 8.9% to $93.40B in H1 2020.
In details, debt in local currency (denominated in LBP) stood at $58.60B by June 2020, registering a 9.62% year-on-year growth. Hence, domestic debt constituted 62.74% of the total public debt, compared to last year’s smaller share of 62.62%.
Looking at net domestic debt, which excludes public sector deposits with the central bank and commercial banks, it increased by 10.23% annually to $84.30B by June 2020.
As for debt denominated in foreign currency (namely in USD), it expanded by a yearly 7.82% to $34.80B over the same period. Therefore, total foreign debt grasped a stake of 37.26% of the total public debt by June 2020, compared to last year’s share of 37.65%.
Worth mentioning, $3.52B of the total debt represents the Unpaid Eurobonds, their coupons and accrued interests. In details, the government had announced in March that it will refrain from making payments on all dollar-denominated Eurobonds as it seeks to negotiate an arrangement with its bondholders and discuss the restructuring of its debt. To-date though, no major decisions regarding the restructuring of Lebanon’s public debt have been taken.
In this context, on August 21, 2020, S&P Global Ratings maintained the “selective default” (SD) rating for Lebanon’s long- and short-term foreign debt, after the country first defaulted in March 2020. However, three more bonds were downgraded to “D” from “CC”. In addition, the rating agency affirmed Lebanon’s long- and short-term local currency ratings at ‘CC/C. Moreover, Lebanon’s local currency sovereign ratings could be lowered to ‘SD’ if the government signals that it will restructure local currency debt in addition to the Eurobonds.
Breakdown of Gross Public Debt in H1 (in $Billions)