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On August 15, Standard & Poor’s Global Ratings (S&P) raised Lebanon’s long-term local currency sovereign rating to ‘CCC’ from ‘CC’ and revised the local currency outlook to “Stable” from “Negative.”
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LIMS explained that the upgrade of Lebanon’s local currency rating reflects an improved capacity to service debts denominated in Lebanese pounds. This development is primarily attributed to recent budget surpluses and the significant reduction of local currency debt, which now totals only about $1 billion due to the devaluation of the Lebanese pound. The outlook has also been supported by renewed optimism over a potential IMF agreement under the new reform-oriented government. However, the country’s foreign currency rating remains at "Selective Default" (SD), as negotiations with international creditors over unpaid dollar-denominated obligations are stalling.
LIMS emphasized that further progress on sovereign ratings will depend on the government’s ability to sustain budget surpluses through public sector restructuring, banking sector revitalization, and measures to attract foreign investment. Continued implementation of reforms, particularly in the electricity and telecommunications sectors, will also be essential. Nevertheless, the outlook remains “stable” rather than “positive”, reflecting both the government’s limited time in office and the structural nature of reforms, which require time to produce measurable results.
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Electricity Regulatory Authority: The Key to Reforming Lebanon’s Electricity Sector
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On August 23, Lebanon received 132,000 metric tonnes of gas oil from Kuwait to supply Électricité du Liban’s (EDL) power plants, half of which was provided as a grant. The remaining volume will be financed through EDL’s own bill collections, following a decision by the Energy and Water Minister to stop borrowing in order to fund fuel procurement. The policy, long advocated by LIMS, marks a break from past reliance on central bank financing or public debt and signals the reformist intent of the new government.
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The structure of the deal highlights the chronic weakness of Lebanon’s state-owned utility. EDL collects only about 50 per cent of electricity bills, often with delays stretching beyond a year — a dynamic reflected in Kuwait’s half-donation. While the latest shipment provides temporary respite, systemic reform is required to tackle losses in revenue collection and improve the sector’s financial viability.
LIMS has urged the government to adopt a distribution model based on private electricity distribution companies (EDC). Under such a framework, private distributors would purchase electricity in bulk from EDL or independent power producers and resell it to consumers. Because their revenues depend directly on collection rates, these EDC would have a strong incentive to enforce payment, in contrast to EDL’s weak enforcement mechanisms. LIMS argues that this approach would boost revenues, reduce the fiscal burden of unpaid bills, and improve service reliability by enabling EDL to finance its full fuel needs.
LIMS further stressed that sustainable reform must begin with the appointment of the long-delayed Electricity Regulatory Authority (ERA), which is mandated by law to oversee licensing for electricity distributors and producers. For the ERA to play an effective role, it must operate independently, with a mandate to liberalise the sector, foster private-sector participation, and dismantle entrenched monopolistic structures.
Formalising the role of private diesel generators, which already achieve near-total bill collection, is another step LIMS views as essential. Integrating them into the formal market could help address distribution gaps and encourage investment in renewable capacity. Many generator operators are shifting to hybrid solar-diesel models, and equal access to infrastructure would allow efficient generators to remain competitive, while less efficient players would be phased out over time.
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Lebanon Orders Repatriation of Post-2019 Capital Transfers
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Lebanon’s Financial Prosecutor has ordered individuals and companies, including bankers, to repatriate funds transferred abroad after the country’s 2019 financial collapse. The directive, which sets a two-month deadline, seeks to compel the return of capital moved out of the banking system during a period when ordinary depositors faced informal capital controls.
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LIMS cautioned, however, that the crisis is often mischaracterised by conflating three distinct categories of funds: post-2019 transfers by connected individuals, stolen public money linked to government expenditure, and the so-called “financial gap” — a catch-all measure that includes central bank losses.
While public debate has focused largely on blaming the banking sector for the third category, LIMS argues that the bulk of the gap is rooted in state spending, notably loans to cover Électricité du Liban’s deficits and a costly subsidy programme launched in 2020. Losses of this nature cannot be attributed to commercial banks.
By contrast, funds transferred abroad after 2019 represent the portion most directly linked to banks. This, LIMS argues, underscores the importance of the judiciary’s investigation to determine the true scale of outflows, which it estimates amount to roughly 20 per cent of the overall gap. Recent amendments to the bank secrecy law empower judges to lift secrecy protections, obliging banks to disclose transfers and their beneficiaries.
LIMS welcomed the move as a critical step toward transparency, noting that identifying and quantifying the transfers is as important as their recovery. But it warned that the state must not use this focus on private transfers to deflect responsibility for broader financial mismanagement.
This positive reform measure, if implemented effectively, could restore liquidity, rebuild confidence in the banking system and lay the groundwork for wider financial and economic stabilisation.
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References
LIMS Media Interviews
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Stable Outlook for Lebanon as S&P Upgrades Local Currency Rating to CCC
- Lebanon’s Financial Rating Between Challenges And Hope: Can The Economy Succeed In Recovery? August 22, 2025: Annahar, Article AR
Electricity Regulatory Authority: The Key to Reforming Lebanon’s Electricity Sector
- Lebanon As A Hub For Exporting Iraqi Oil… If Not For The Corruption Of The Corrupt! August 15, 2025: Al Modon, Article AR
- Lebanon’s Electricity In 2029 From Egypt.. So Wait, August 26, 2025: Al Jadeed, Video Interview AR
- The Delay In Collection Worsened The Electricity Crisis, And The Solution Lies In Private Distribution Companies, August 28, 2025: Al Jadeed, Video Interview AR
- Electricity Update: Unrealistic Proposals And The Crisis Remains Stalled, August 29, 2025: Al Joumhouria, Article AR
- Decline Of Public Services And Escalation Of Financial Burdens On Citizens, August 29, 2025: Al Jadeed, Video Interview AR
Lebanon Orders Repatriation of Post-2019 Capital Transfers
- The Old $100… From Rumor To Extortion System, August 21, 2025: MTV, Video Interview AR
- A First Step Defines Responsibilities For The “Looted” Deposits, August 21, 2025: Lebanon Debate, Article AR
- Decline Of Confidence In Banks Deepens Financial Isolation In Lebanon, August 13, 2025: CNBC, Video Interview AR
- Hiding Behind Transferred Funds To “Cover Up Corruption”? August 25, 2025: Lebanon Debate, Article AR
- Shaaito’s Decision To Recover Funds From Abroad: A Beginning Of Settlement Or A Step Toward Solving The Crisis? August 29, 2025: Al Hurra, Article AR
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