S&P upgrades Lebanon credit rating

Standard & Poor’s Ratings Services raised Lebanon’s sovereign-credit ratings and gave them a positive outlook because of banking resilience and the expectation of political stability in the medium term.

Over three years of political flux, Lebanon’s public finances and especially its banking system remained resilient, according to S&P. In addition, the new party consensus improves the likelihood of achieving reforms recommended by the International Monetary Fund and the Paris III conference on rebuilding the country. These reforms could lower fiscal deficits, cut government debt-to- gross-domestic-product levels and reduce Lebanon’s liabilities.

The agency Tuesday said it expects, conservatively, that the central government fiscal deficit could fall to 6.3% of GDP in 2012 from 9.9% in 2008.

S&P raised its long- and short-term sovereign-credit ratings on the Republic of Lebanon one notch to B. Further ratings action will depend on how much success the new government has in increasing fiscal stability. The rating would face downward pressure should civil unrest break out or the government falters in its pursuit of the Paris III reforms. WSJ