Spotlight: Lebanon's Fitch rating downgrade not to impact financial situation: expert

0 Comment(s)Print E-mail Xinhua, December 13, 2019
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by Dana Halawi

BEIRUT, Dec. 12 (Xinhua) -- A leading Lebanese economist said that Fitch's downgrading of Lebanon's credit rating from CCC to CC will not have an impact on the already complicated financial situation.

"It is true that we are in a difficult situation, but this does not justify the issuance of a report at this time by Fitch, which has already downgraded Lebanon to CCC," Nassib Ghobril, head of the economic research department at Byblos Bank, told Xinhua.

"Rating agencies are keen to issue these reports because they were strongly criticized during the 2008 financial crisis for not anticipating the crisis and downgrading financial instruments," Ghobril explained.

Ghobril said that the market and holders of Eurobonds are highly aware that the situation is complicated. "This is why I believe that this downgrade won't have a bad impact like the previous ones," he said.

While ruling out a negative impact of the rating downgrade on the financial sector, Ghobril urged measures to enhance growth.

He explained that if the economy grows faster than the increase in public debt, then the country can reduce its deficit-to-GDP ratio and debt-to-GDP ratio.

Ghobril also emphasized the need for a credible government capable of implementing in-depth reforms that would send a positive effect to the markets.

The expert said that the government's focus is on the ways to generate more revenues, which is misleading. "Our focus now should be on reducing public expenditures and improving governance in the public sector," he said.

Ghobril also said that it is "wrong" to adopt a policy with more austerity measures.

"It is not possible for an economy to grow when you continue increasing taxes. There are other measures that can be adopted such as tax evasion, preventing smuggling, proper collection of fees and public sector overhaul," he said.

Lebanon has been witnessing nationwide protests since Oct. 17, which have led to the resignation of Saad Hariri's cabinet.

At the same time, the country has been facing a serious economic crisis in the past few months with a shortage in the U.S. dollars started in August because of the drop in cash injections by Lebanese expatriates.

The Lebanese pound which has been pegged to the dollar for the past two decades at a fixed rate of 1,507 pounds has weakened because of the shortage in the U.S. currency in the market.

The Lebanese protesters vowed not to leave the streets until they achieve their goals including a serious move by the judiciary system to hold all corrupt politicians accountable for their behavior. Enditem

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