Moody’s warns new Lebanon political vacuum would be ‘credit negative’

BEIRUT – Rating agency Moody’s warned on Tuesday that reopening Lebanon’s political vacuum after the resignation on Saturday of prime minister Saad al-Hariri would damage the tiny country’s credit rating.

“A drawn-out political stalemate less than a month after the government passed its first budget in 12 years would undermine recent institutional improvements and expose the banking system to a loss in confidence,” it said in an emailed note.

“Any loss of confidence in the banking system or in the stability of Lebanon’s institutions leading to a significant slowdown in private sector deposit inflows or outright outflows would be credit negative,” it added.

Lebanon’s central bank governor, finance minister and banking association head have all issued statements assuring that Lebanon’s monetary and financial situation is stable.

The country’s fragile economy has one of the world’s highest debt-to-GDP ratios and is underpinned by its banking system.

Hariri resigned in a televised broadcast from Saudi Arabia on Saturday, taking Lebanon’s political elite by surprise, and plunging Beirut into a political crisis.

President Michel Aoun has said he will not accept Hariri’s resignation until he returns to Lebanon to explain his reasons, putting off the difficult political consultations among Lebanese factions to form a new government.

As the most influential politician in the Sunni community, which in Lebanon’s sectarian system must fill the position of prime minister, Hariri has no obvious successor.