Hariri resignation may lead to credit downgrade

Move could dent confidence in banking system: Moody’s

BEIRUT, Nov 7, (AFP): The surprise resignation of Lebanon’s prime minister at the weekend could reduce confidence in the country’s banking system and lead to a credit rating downgrade, Moody’s Investors Service has said.

The shock announcement by Saad Hariri in a television broadcast from Saudi Arabia has prompted worries that Lebanon would be sent into a political and economic tailspin.

On Monday, Moody’s said the move “threatens to disrupt the fragile political balance in place” during Hariri’s one-year stint as premier.

“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,” the rating agency said.

“Our elevated political event risk assessment indicates a higher susceptibility to a downgrade in case of a prolonged political stalemate.”

Moody’s has a “B3 stable” rating for Lebanon.

Since its devastating 1975-1990 civil war, Lebanon has been weighed down with endemic corruption and a national debt estimated at 140 percent of GDP.

The 2005 assassination of former premier Rafik Hariri — Saad’s father — plunged Lebanon into further economic and political turmoil.

Last month, lawmakers passed a government budget for the first time since 2005, but it covers the current financial year, not 2018.

Since Hariri’s televised resignation on Saturday, analysts have expressed concern that job creation and investor confidence in Lebanon could suffer a serious blow.

But Lebanese President Michel Aoun and senior economic officials met on Monday and sought to allay those fears.

“What we can confirm is that we can absorb this problem through our financial and monetary capabilities — we don’t expect serious risks to this stability,” said Finance Minister Ali Hassan Khalil after the meeting.