LEBANON

RISK RATING
Severe
Default High Risk Score 9.00
Normal Average 5.75
Weighted Average 5.60
RISK RATING HISTORY
RISK RATING SCALE

Risk Rating Scale

Severe: 8.0 to 10
High: 6.0 to 7.9
Elevated: 4.0 to 5.9
Moderate: 2.0 to 3.9
Low: 0.0 to 1.9
EXCHANGE RATE
Country Outlook

Lebanon is facing multiple crises, including an unprecedented financial meltdown, political chaos, the COVID-19 pandemic, and the 2020 huge explosion at Beirut’s port, which killed nearly 200 people and caused billions of dollars in damage. The new government must launch an economic recovery, crack down on entrenched corruption, and unlock foreign aid to avoid critical destabilisation through unrest and insecurity. A drop in Lebanese exports to trade partners including the UAE and Saudi Arabia will endanger regional economic security. French efforts to form a coalition government have been frustrated by new US sanctions and political infighting between the major parliamentary blocs. Lebanon is in default on its massive debt. Lebanese banks, the government’s biggest creditor and the single largest constituency of Eurobonds holders, have traded blame with the state for the crisis.

  • Protests and civil disobedience have undermined the formation of a stable government since 2019. The unrest was initially triggered by planned taxes on gasoline, tobacco, and online phone calls, but has expanded into protracted and widespread condemnation of sectarian rule, socio-economic grievances, and corruption, including banking secrecy. Protestors’ demands for a government of independent specialists have been frustrated by political divisions, the worst economic crisis in decades, and the fall-out over the 2020 Beirut explosion that caused damages of between USD 3.8 billion and USD 4.6 billion, according to the World Bank.
  • An influx of refugees from Syria and Palestine has resulted in insecurity and threatened conflict spill-over several times. Military action from Israel is a frequent threat to Lebanon. The Shia Islamist political party and militant group Hezbollah remains an influential power in Lebanon and receives substantial Iranian support, which puts it at loggerheads with Israel and many Sunni Arab states. Hezbollah is also active in the Yemen war, where it opposes the Saudi-led coalition. The 2020 killing of top Iranian general Qassem Soleimani in Iraq threatens retaliatory violence against US interests in Lebanon. The US has widened sanctions against Hezbollah, which many western countries deems a terrorist group, and its Lebanese allies as part of a maximum pressure campaign against Iran that heightened regional tensions.
  • A serious financial crisis has paralysed Lebanon’s economy and pushed many people into poverty. Prices of consumer goods have soared in a country that relies heavily on imports but produces little. In 2020, a third of all private sector jobs were lost, while unemployment reached new records following the 2020 Beirut port explosion, multiple lockdowns, and collapse of the tourism sector. The value of the currency has plummeted and there is a shortage of foreign exchange that has impacted importers of key goods: such as wheat, fuel, and medicine. Lebanon’s external financing needs for the next four years have swelled to more than USD 30 billion, while the state declared default on its hefty foreign currency debt in 2020. Public debt has rocketed from 131 percent of GDP in 2012 to an estimated 176 percent of GDP at the end of 2019 – one of the world’s highest burdens.
CUMULATIVE AND DAILY COVID-19 INFECTIONS AND DEATH RATE
INTERNATIONAL MONETARY FUND | DATAMAPPER
Risk Perils
Political Instability
6.0
Expropriation, Nationalisation, Confiscation & Deprivation
4.5
Contract Frustration & Breach
5.0
Taxation
5.0
Bribery & Corruption
5.0
Regulatory Burden
4.0
Strikes, Riots & Civil Commotion
7.0
Security
5.0
Sovereign Default
9.0
Economic Volatiliy
7.0

Risk Rating Scale (small)

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