Global rating agency Moody’s has kept Lebanon’s issuer rating at C, citing that bondholder losses from the country’s March 2020 default are likely to exceed 65 percent.

The country faces deep economic, financial and social challenges due to high geopolitical risks, even after a fragile ceasefire between Israel and Hezbollah, the agency said in a report. Hostilities are still ongoing between Lebanon and its southern neighbour, with Israeli strikes killing at least five people this week.

However, the election of a new president and the formation of a new government earlier this year have set the stage for the enactment of key legislation to implement a complete debt restructuring across the public sector, the central bank (Banque du Liban), and commercial banks, the report said.

Successive governments have failed to implement the restructuring needed since 2020.

The sharp depreciation of the currency and high inflation following the break of the local currency peg to the dollar have largely inflated away the domestic debt stock.

The country’s $31 billion in outstanding eurobond debt has accumulated unpaid interest, raising total liabilities to $42 billion, which is 127 percent of GDP in 2025.

“We expect the debt burden to remain at similar levels in 2026 if restructuring does not take place,” Moody’s said, expecting a possible restructuring to be announced on relatively short notice, likely to be after parliamentary elections scheduled for May 2026.

The stable outlook indicates that Lebanon’s rating is unlikely to change before the debt restructuring is completed, given the extent of the macroeconomic, financial and social challenges.

After an economic contraction of 7.5 percent in 2024, Moody’s expects real GDP growth of 2.5 percent and 3.5 percent in 2025 and 2026, respectively.

These forecasts assume the ceasefire holds, which would help improve the business environment and encourage domestic and foreign investment, it said.