S&P Global Ratings affirmed Lebanon's long- and short-term foreign and local currency sovereign credit ratings at 'B-/B', and revised the outlook on the long-term ratings from 'stable' to 'negative'. It attributed the affirmation of the ratings to its expectation that deposit inflows to the banking system will increase given the formation of the government. Also, it anticipated that financial support from Qatar and potentially from Saudi Arabia, along with Banque du Liban's (BdL) servicing of the government's foreign currency debt, will remain sufficient to support the government's borrowing requirements and fund the country's external deficit over the next 12 months. It noted that the government's implementation of some of the crucial reforms that it included in the Ministerial Statement could strengthen depositor confidence. In addition, it pointed out that BdL plays a significant role in directing macroeconomic and financial policy, and assists in financing the fiscal deficit. It estimated that BdL's usable foreign currency reserves remain at a comfortable level and cover nine months of current account payments at the end of 2018. It said that the ratings also take into account Lebanon's wide fiscal and external deficits, high public debt levels, sectarian divisions and elevated regional security risks. 

S&P indicated that the outlook revision reflects the risk that a lack of material reforms to reduce the fiscal deficit may lead to a deterioration in investor confidence, which could weigh on non-resident deposit flows and foreign currency reserves, and constrain Lebanon's ability to service its foreign currency debt. It pointed out that the new government has shown willingness to act and to address the prevailing challenges, such as through the quick drafting of the Ministerial Statement that included several structural reform measures. It expected the government to finalize the 2019 budget in the coming two months, and to include some of the reforms that authorities submitted at the CEDRE conference. It pointed out that the timely implementation of fiscal and economic reforms could help avoid the deterioration in public finances and investor confidence. However, it considered that the implementation of reforms remains uncertain. Also, it considered that the international community could require more substantial fiscal consolidation than just reducing the fiscal deficit by 1% of GDP annually over the next five years, following the significant widening of the deficit in 2018. In this context, it expected the disbursement of the $11bn that the international community pledged at the CEDRE conference to be gradual and lower than the initially pledged amount, given that the funding is contingent on the implementation of reforms, including the reduction of public finance imbalances. Also, it expected economic activity to gradually improve in the coming years, supported by the government's Capital Investment Program and by the easing of tensions in Syria.