Lebanon, which is saddled with the world’s third highest debt-to-GDP ratio of 150 per cent, is struggling to control its finances amid a stagnating economy and pressure from hosting over a million Syrian refugees. AFP
Lebanon, which is saddled with the world’s third highest debt-to-GDP ratio of 150 per cent, is struggling to control its finances amid a stagnating economy and pressure from hosting over a million SyrShow more

Moody’s downgrades Lebanon’s credit rating to junk over debt default concern



Moody’s Investors Service downgraded its credit rating for Lebanon deeper into junk territory, the first time in more than two decades, citing concerns over the government’s ability to pay or restructure its debt amid a liquidity crunch that raises the risk of default.

“Moody's decision to downgrade the ratings to Caa1 from B3 reflects the heightened risk that the government's response to increased liquidity and financial stability risks will include a debt rescheduling or other liability management exercise that may constitute a default under Moody's definition,” it said.

Tuesday's downgrade puts Lebanon on par with Gabon, Zambia, Iraq and Ukraine. The cut led to the yield on Lebanese 2021 bonds to rise 11 basis points, according to Bloomberg data. In December, Moody's changed the outlook on Lebanon's then B3 issuer ratings to negative on the back of "rising liquidity and financial stability risks”.

Lebanon, which is being governed by a caretaker administration for the past eight months, is saddled with the world’s third highest debt to GDP ratio – 150 per cent – and is struggling to control its finances amid a stagnating economy and pressure from hosting over a million Syrian refugees. Political bickering has blocked the formation of a new government and is adding to the economic uncertainty.

“The high political event risk and very low fiscal policy effectiveness embedded in Lebanon's credit profile reflect Moody's assessment that the capacity for a government to implement significant fiscal consolidation is limited, even if a government were formed in the near future,” Moody’s said. “A continuing delay in the formation of a government would add to Lebanon's liquidity pressures, increasing the potential size, perimeter and urgency of such a liability management exercise in future.”

The country's existing woes worsened when earlier this month the country’s finance minister spooked markets with talk of a debt restructure only to deny the plans to various media outlets a day later.

Ali Khalil’s statements made it more costly to insure Lebanon’s debt and rattled investors holding Lebanese paper, with bond prices plunging to a record low, only to recover later.

"The downgrade is the cost of the procrastination and obstructionism in the formation of the government," said Nassib Ghobril, chief economist of Byblos Bank.

However, Mr Ghobril also criticised the rating agency for not waiting for end-of-year indicators, like the balance of payments, the balance sheet of commercial banks, or the fiscal outcome, as the Finance Ministry has only published budget results up until September 2018 and not for the full year, and as the latest balance of payments results and the balance sheet of commercial banks are for November.

"Another reason for the downgrade is rather unconvincing, as the agency considers that measures that Lebanese authorities might take to reduce debtservicing cost would consist of an implicit default on Lebanon’s obligations. However, the government has not specified any measures yet, and efforts to reduce debt servicing cost are usually a positive step," added Mr Ghobril.

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Read more:

Lebanon's lucky streak may be fading in face of mounting economic woes

Lebanon’s business conditions in July deteriorate to near two-year low

IMF hopeful of a new government, economic reforms in Lebanon

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Lebanon’s debt to GDP ratio could balloon to 180 per cent by 2023 if the government does not undertake the necessary reforms to narrow its fiscal deficit, which may reach 10 per cent of GDP amid the current geopolitical tensions, the International Monetary Fund said in February last year.

Qatar pledged to buy $500 million (Dh1.83 billion) worth of Lebanese bonds this week, helping Beirut’s eurobonds rally the most since September.

In 2018, Lebanon received pledges of about $11bn in soft loans and grants from donors at the Cedre conference in Paris in return for implementing reforms.

However, the delay in forming a government has hampered disbursement of the aid.

“An event of default may be avoided if, upon its formation, a new government takes some fiscal consolidation measures that unlock the Cedre public investment package,” Moody’s said.

“Alternatively or in conjunction with Cedre inflows, more financial interventions by the central bank could contribute to avoiding a default event if that is achieved while maintaining broad financial stability.”

Moody's said the formation of a government is essential to coming up with plans to reduce spiralling debt and narrow the widening fiscal deficit.

Lebanon’s gross financing needs exceed 30 per cent of GDP, among the highest in the world, according to Moody’s. Debt servicing costs eat up nearly 50 per cent of government revenue.

“In the absence of significant fiscal consolidation and in the context of markedly slowing capital inflows and bank deposits, reliance on the Banque du Liban (the central bank) to suppress the government’s financing costs in order to prevent a yet higher debt servicing bill is increasingly challenging to reconcile with the central bank’s objective of maintaining financial stability,” Moody’s said.

“Covering this year’s fiscal deficit and eurobond maturities without drawing on foreign exchange reserves would require bank deposit inflows of $6bn to 7bn, compared to $4bn to 5bn estimated in 2018.”

That scenario stands in stark contrast to 2008-2009 when the country was able to survive the global financial crisis with high interest rates on deposits that garnered monthly inflows as high as $1.5bn. 

DMZ facts
  • The DMZ was created as a buffer after the 1950-53 Korean War.
  • It runs 248 kilometers across the Korean Peninsula and is 4km wide.
  • The zone is jointly overseen by the US-led United Nations Command and North Korea.
  • It is littered with an estimated 2 million mines, tank traps, razor wire fences and guard posts.
  • Donald Trump and Kim Jong-Un met at a building in Panmunjom, where an armistice was signed to stop the Korean War.
  • Panmunjom is 52km north of the Korean capital Seoul and 147km south of Pyongyang, North Korea’s capital.
  • Former US president Bill Clinton visited Panmunjom in 1993, while Ronald Reagan visited the DMZ in 1983, George W. Bush in 2002 and Barack Obama visited a nearby military camp in 2012. 
  • Mr Trump planned to visit in November 2017, but heavy fog that prevented his helicopter from landing.
Formula Middle East Calendar (Formula Regional and Formula 4)
Round 1: January 17-19, Yas Marina Circuit – Abu Dhabi
 
Round 2: January 22-23, Yas Marina Circuit – Abu Dhabi
 
Round 3: February 7-9, Dubai Autodrome – Dubai
 
Round 4: February 14-16, Yas Marina Circuit – Abu Dhabi
 
Round 5: February 25-27, Jeddah Corniche Circuit – Saudi Arabia
ICC Awards for 2021

MEN

Cricketer of the Year – Shaheen Afridi (Pakistan)

T20 Cricketer of the Year – Mohammad Rizwan (Pakistan)

ODI Cricketer of the Year – Babar Azam (Pakistan)

Test Cricketer of the Year – Joe Root (England)

WOMEN

Cricketer of the Year – Smriti Mandhana (India)

ODI Cricketer of the Year – Lizelle Lee (South Africa)

T20 Cricketer of the Year – Tammy Beaumont (England)

Company%20Profile
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The Sand Castle

Director: Matty Brown

Stars: Nadine Labaki, Ziad Bakri, Zain Al Rafeea, Riman Al Rafeea

Rating: 2.5/5

German intelligence warnings
  • 2002: "Hezbollah supporters feared becoming a target of security services because of the effects of [9/11] ... discussions on Hezbollah policy moved from mosques into smaller circles in private homes." Supporters in Germany: 800
  • 2013: "Financial and logistical support from Germany for Hezbollah in Lebanon supports the armed struggle against Israel ... Hezbollah supporters in Germany hold back from actions that would gain publicity." Supporters in Germany: 950
  • 2023: "It must be reckoned with that Hezbollah will continue to plan terrorist actions outside the Middle East against Israel or Israeli interests." Supporters in Germany: 1,250 

Source: Federal Office for the Protection of the Constitution

Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.

Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.

Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.

Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.

“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.

Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.

From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.

Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.

BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.

Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.

Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.

“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.

Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.

“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.

“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”

The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”

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The specs
 
Engine: 3.0-litre six-cylinder turbo
Power: 398hp from 5,250rpm
Torque: 580Nm at 1,900-4,800rpm
Transmission: Eight-speed auto
Fuel economy, combined: 6.5L/100km
On sale: December
Price: From Dh330,000 (estimate)
The specs

Engine: 3-litre twin-turbo V6

Power: 400hp

Torque: 475Nm

Transmission: 9-speed automatic

Price: From Dh215,900

On sale: Now

Dubai World Cup Carnival Thursday race card

6.30pm: Dubai Millennium Stakes Group Three US$200,000 (Turf) 2,000m
7.05pm: Handicap $135,000 (T) 1,600m​​​​​​​
7.40pm: UAE Oaks Group Three $250,000 (Dirt) 1,900m​​​​​​​
8.15pm: Zabeel Mile Group Two $250,000 (T) 1,600m​​​​​​​
8.50pm: Meydan Sprint Group Two $250,000 (T) 1,000m​​​​​​​
9.25pm: Handicap $135,000 (D) 1,400m
10pm: Handicap $135,000 (T) 1,600m

Biography

Her family: She has four sons, aged 29, 27, 25 and 24 and is a grandmother-of-nine

Favourite book: Flashes of Thought by Sheikh Mohammed bin Rashid

Favourite drink: Water

Her hobbies: Reading and volunteer work

Favourite music: Classical music

Her motto: I don't wait, I initiate

 

 

 

 

 

Company%20profile
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Guide to intelligent investing
Investing success often hinges on discipline and perspective. As markets fluctuate, remember these guiding principles:
  • Stay invested: Time in the market, not timing the market, is critical to long-term gains.
  • Rational thinking: Breathe and avoid emotional decision-making; let logic and planning guide your actions.
  • Strategic patience: Understand why you’re investing and allow time for your strategies to unfold.
 
 
How to protect yourself when air quality drops

Install an air filter in your home.

Close your windows and turn on the AC.

Shower or bath after being outside.

Wear a face mask.

Stay indoors when conditions are particularly poor.

If driving, turn your engine off when stationary.

Director: Laxman Utekar

Cast: Vicky Kaushal, Akshaye Khanna, Diana Penty, Vineet Kumar Singh, Rashmika Mandanna

Rating: 1/5

Traces%20of%20Enayat
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Cryopreservation: A timeline
  1. Keyhole surgery under general anaesthetic
  2. Ovarian tissue surgically removed
  3. Tissue processed in a high-tech facility
  4. Tissue re-implanted at a time of the patient’s choosing
  5. Full hormone production regained within 4-6 months
COMPANY PROFILE
Name: HyperSpace
 
Started: 2020
 
Founders: Alexander Heller, Rama Allen and Desi Gonzalez
 
Based: Dubai, UAE
 
Sector: Entertainment 
 
Number of staff: 210 
 
Investment raised: $75 million from investors including Galaxy Interactive, Riyadh Season, Sega Ventures and Apis Venture Partners
McLaren GT specs

Engine: 4-litre twin-turbo V8

Transmission: seven-speed

Power: 620bhp

Torque: 630Nm

Price: Dh875,000

On sale: now

How to turn your property into a holiday home
  1. Ensure decoration and styling – and portal photography – quality is high to achieve maximum rates.
  2. Research equivalent Airbnb homes in your location to ensure competitiveness.
  3. Post on all relevant platforms to reach the widest audience; whether you let personally or via an agency know your potential guest profile – aiming for the wrong demographic may leave your property empty.
  4. Factor in costs when working out if holiday letting is beneficial. The annual DCTM fee runs from Dh370 for a one-bedroom flat to Dh1,200. Tourism tax is Dh10-15 per bedroom, per night.
  5. Check your management company has a physical office, a valid DTCM licence and is licencing your property and paying tourism taxes. For transparency, regularly view your booking calendar.