Republic of Lebanon FC/LC ratings raised to 'B-' as political tensions ease; outlook stable

The outlook remains stable.

The short-term ratings were affirmed at 'C' and the transfer and convertibility assessment was affirmed at 'B+'.

"The ratings on Lebanon were raised to reflect the easing of tensions between the March 14th coalition, which dominated the government, and the opposition that in May had taken Lebanon to the brink of civil conflict," Standard & Poor's credit analyst Ben Faulks said.

"The Doha accord, which has delivered the election of a president and the formation of a national unity cabinet, augurs well for Lebanon's immediate political stability. This reduces the risk that depositors will withdraw funds from the Lebanese banking sector, which in turn lessens the government's near-term financing risks as banks are by far the government's largest creditors."

The stable outlook balances Lebanon's political and fiscal pressures against the country's economic resilience and the likelihood of third-party support.

The ratings will be lowered should political tensions escalate to the extent that they seem likely to shake the long-documented resilience of depositors in the Lebanese banking sector.

The ratings could be raised if the political compact strengthens to the point where the government begins to make progress in advancing the program of economic reforms pledged at the Paris III conference.