BEIRUT: Lebanon’s cash-strapped authorities are struggling to decide what to do about a $1.2 billion Eurobond maturing in March but are leaning toward repayment for foreign holders and a swap for local investors, political and banking sources said on Tuesday.
Lebanon, which has never defaulted on its hefty debt, is in the throes of a financial and economic crisis that has shattered confidence in banks and ignited protests against a political elite blamed for steering the country toward collapse.
A government source and two senior political sources said big differences remained over options: pay in full, ask local holders of the issue to swap for longer-dated notes delaying payment by at least 10 years, or simply not pay.
Two of those sources and three senior bankers said a swap would ease pressure on dwindling foreign currency reserves and buy time. Three sources said the government has not initiated any steps for a default scenario.
Lebanon’s dollar bonds have gained in recent days, with the rally particularly pronounced among shorter-term bonds, signalling growing expectations that the government might pay its most immediate debt obligations.
The country has $2.5 billion in principal and $1.9 billion in coupon payments on Eurobonds due in 2020.
The March 2020 issue has added 12% in the past four trading sessions and was trading at 84.6 cents to the dollar on Tuesday, according to RRPSBONDS data.
In contrast, Lebanon’s longer-dated bonds are trading at 50 cents to the dollar or lower, indicating a higher probability of a debt default or restructuring at some point.
The government source said that Lebanon, grappling with one of the world’s heaviest debt burdens, would not be able to avoid a debt restructuring further down the road and would need assistance from the International Monetary Fund, which would require consensus in Lebanon’s fractured political landscape.
“Kicking the can down the road by paying means a lot of money out of scarce resources and there are more maturities coming in April and June, so it’s only a few months of extra breathing space,” said Paul McNamara, investment director at asset manager GAM.
The two political sources said Prime Minister Hassan Diab preferred making the March payment on time to avoid any blemish on the country’s reputation as his government, formed last month, tries to win back the confidence of international donors.
“He does not want to start his term with a default on debt obligations and give any negative sign to the international community,” one of the political sources told Reuters.
Ratings agencies have warned a swap would constitute a selective default.
One of the senior bankers said he expected the government to ask domestic holders to agree on a swap. “This is bad for the banks ... but it’s not like we have much of a choice,” he said.
Lebanon struggles over Eurobond decision as clock runs down
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Lebanon struggles over Eurobond decision as clock runs down
Fitch reaffirms Saudi Arabia at A+ on fiscal, external strength
RIYADH: Saudi Arabia’s sovereign credit rating was affirmed at A+ with a stable outlook by Fitch Ratings, reflecting the Kingdom’s strong fiscal and external balance sheets.
In its latest report, Fitch said Saudi Arabia continues to benefit from large sovereign net foreign assets and substantial fiscal buffers, including government deposits and other public-sector holdings.
These strengths place the Kingdom well above both “A” and “AA” peers on key balance-sheet metrics, the agency said.
The latest rating action comes as the Kingdom continues to navigate the impact of lower oil prices while advancing its economic diversification agenda.
Underscoring the strength of Saudi Arabia’s economic growth, the World Bank earlier this month said the Kingdom’s gross domestic product is expected to expand by 4.3 percent in 2026 and 4.4 percent in 2027, up from an expected 3.8 percent in 2025.
In its latest report, Fitch stated: “Oil dependence, World Bank Governance Indicators and vulnerability to geopolitical shocks have improved but remain weaknesses.”
It added: “Deep and broad social and economic reforms implemented under Vision 2030 are diversifying economic activity, albeit at a meaningful cost to the balance sheets.”
The US-based agency added that Saudi Arabia’s reserves are projected at 11.6 months of current external payments in 2026, well above the peer median of 1.9 months.
The Kingdom’s sovereign net foreign assets are expected to decline due to higher borrowing but will remain a clear credit strength, at 41.2 percent of GDP at end-2026, compared with a peer median of 3.6 percent.
Fitch also forecast a widening of the current account deficit to 4.3 percent of GDP in 2026 from an estimated 3 percent in 2025, reflecting the cost of imported inputs linked to high domestic spending and a small increase in oil export receipts.
“The deficit should narrow slightly in 2027 as revenues benefit from higher oil export volumes, new export facilities coming on stream and higher tourism inflows, supported by slower import growth from lower project spending,” it said, adding that external borrowing and a further reorientation of public assets to domestic from foreign investments should keep reserves stable.
Fiscal deficit to narrow
Saudi Arabia’s fiscal deficit is expected to narrow to 3.6 percent of GDP by 2027 after lower oil revenues and overspending pushed it to an estimated 5 percent in 2025.
Oil revenues are expected to rise from 2025 as higher production offsets the impact of lower prices.
“Non-oil revenues will continue to benefit from buoyant economic activity and improved collection techniques. Fitch assumes spending growth will be low, as capex has likely peaked and measures are in place to contain current spending,” added the report.
Solid growth and reform momentum
According to the report, Saudi Arabia’s economy is expected to expand by 4.8 percent in 2026, following an estimated 4.6 percent growth in 2025.
This expansion will be driven by higher oil production, reflecting OPEC+-related output increases over 2025, as well as robust growth in the non-hydrocarbon sector.
“Prospects for the non-oil sector remain healthy, underpinned by reform, high levels of government and GRE (government-related entities) spending, new projects coming on stream and buoyant consumer spending,” said the report.
Earlier this month, a separate analysis by Standard Chartered echoed similar expectations, forecasting the Kingdom’s GDP to expand by 4.5 percent in 2026, outperforming the projected global growth average of 3.4 percent, supported by momentum in both hydrocarbon and non-oil sectors.
In October, the International Monetary Fund said Saudi Arabia’s economy is projected to expand by 4 percent in both 2025 and 2026.
Fitch added that reform momentum remains strong, citing recent steps including a new investment law and a greater opening of the real estate and stock markets to foreign investors.
“A removal of fees on some expat workers in the industrial sector highlights an understanding of the need to ease near-term bottlenecks. Nonetheless, the resilience of non-oil growth to a period of lower government and GRE spending remains to be tested,” said Fitch.
The report also underscored the health of Saudi Arabia’s banking system, noting that credit growth and high net interest margins have supported profitability.
Over the first three quarters of 2025, capital adequacy edged up to 20 percent, while non-performing loans fell to an all-time low of 1.1 percent.
“Credit growth is slowing owing to macroprudential measures, but should remain just above nominal non-oil GDP growth,” Fitch said, adding that lending growth has continued to outpace deposit growth, leading to a further deterioration in the sector’s net foreign asset position. “However, this remains relatively small compared to total assets of the banking sector and is in stable forms,” it added.
Potential rating sensitivities
Fitch said greater non-oil revenue generation or rationalisation of expenditure, while maintaining the strength of the wider public-sector balance sheet, could support an upgrade of Saudi Arabia’s rating.
A continuation of economic reforms that underpin strong non-oil growth, combined with higher oil prices, could also improve the Kingdom’s credit profile.
On the downside, a deterioration in public finances or a major escalation of geopolitical tensions could lead to a downgrade.
In March 2025, S&P Global also raised Saudi Arabia’s rating to ‘A+’ from ‘A’ with a stable outlook, citing the Kingdom’s ongoing social and economic transformation.
In December, the Public Investment Fund secured an inaugural A-1 short-term credit rating with a stable outlook from S&P Global Ratings, marking a milestone for the sovereign wealth fund as it strengthens its global financial standing.
S&P said the rating reflects PIF’s “robust balance sheet, strong liquidity position, and disciplined financial management,” and aligns with Saudi Arabia’s own short-term sovereign rating.
