S&P Global Ratings affirmed at 'SD/SD' (Selective Default) Lebanon's long- and short-term foreign currency sovereign credit ratings, and kept at 'CC/C' the country's long- and short-term local currency ratings, with a 'negative' outlook on the long-term ratings. The foreign-currency sovereign credit ratings of 'SD' are 12 notches below investment grade. In addition, the agency revised from 'CC' to 'D' (Default) the issue ratings on the January 2023 notes, the February 2025 bonds and the February 2030 bonds, due to the government missing coupons payments that were due in July and August. It indicated that the 'negative' outlook on the local currency ratings reflects the increasing likelihood that the government will decide to restructure its Lebanese-pound denominated debt, as part of a broader restructuring program to place the public debt on a sustainable footing.
 
S&P indicated that the explosion at the Port of Beirut has deepened the country's economic crisis, and that a protracted political vacuum or a weak new government could further delay policy reforms, the disbursement of external aid, and the negotiations to restructure the public debt. It said that international donors committed about $300m in immediate humanitarian support to Lebanon, but stressed that additional support, including the $11bn pledged at the CEDRE conference, is contingent on the authorities' implementation of policy reforms. It considered that the resignation of the current government could diffuse some social tensions and allow a new government to fast-track reform efforts. It expected the implementation of fiscal reforms and the reduction of losses at state-owned enterprises to shape Lebanon's future recovery plan. It also anticipated the plan to include banking sector reforms, structural reforms to encourage private sector investment and productivity, the devaluation of the official exchange rate, as well as the formalization of capital controls. 
 
In addition, the agency pointed out that, since the Lebanese government announced the suspension of payments on its external debt in March 2020, it has made limited progress in engaging with creditors on debt-restructuring negotiations. It added that key political players have yet to agree on the causes and scope of the country's crisis, which has made it difficult to reach a deal with the International Monetary Fund on a funded program. As such, it expected the debt restructuring negotiations to extend beyond 2020, without a strong commitment by Lebanese authorities to implement economic, fiscal and monetary reforms, and in the absence of a policy anchor provided by an IMF program. It considered that the authorities' challenges are exacerbated by the COVID-19 outbreak that has further weighed on the country's already weak economic activity and severe fiscal pressures. It added that progress on reviving the economy and financial system will depend on the time that political parties will take to form a new government, as well as on the Cabinet's composition.
 
Further, S&P indicated that it could upgrade Lebanon's local currency ratings in case significant donor funding materializes, which would allow the government to implement immediate structural reforms; or if meaningful reforms led to sustained and strong economic growth. In such a scenario, the agency expected that the restructuring of the Lebanese pound-denominated commercial debt would become less likely. Also, it said that it would raise Lebanon's long-term foreign currency sovereign issuer credit rating from 'SD' and the country's issue ratings from 'D' in case the government completes the restructuring of its foreign debt.