One of the economic news stories this weekend is that the price of Lebanese Eurobonds, the dollar-denominated debt securities, have hit their highest level in two years. The country has been in default since March 2020, well before the clashes between Hezbollah and Israel began and escalated into near-all-out war.

According to market data, the average price of Eurobonds on the secondary market closed the week at its highest level in some time, at 9.35 cents on the dollar, according to Marwan Barakat, head of the economic department at Bank Audi. The price was at 8.50 cents a week earlier, which is higher than the price it reached the day after Donald Trump was elected at the start of November or the 8.75 cents it reached in October. These prices are those negotiated between holders of Eurobonds on the secondary market since the country has not issued new series since the default, but only Treasury bonds in Lebanese pounds, whose value has collapsed by 90 percent in five years, while continuing to pay interest on them.

For Barakat, this appreciation of Eurobonds is directly "linked to the conclusion of the cease-fire and the improvement of the political and economic outlook." Institutional investors are betting on an end to the domestic political impasse that has characterized Lebanon in recent years, as well as on the possibility of a restructuring of the foreign currency debt on the horizon, he explained.

Before the recent improvement in their prices, Eurobonds, which are traded only between holders of already issued securities, had been languishing for years in a range of six to seven cents, which they have long been evolving since the default that followed the start of the economic and financial crisis in 2019. Since then, the state has still not started a restructuring process, nor launched reforms allowing it to clean up its finances or restructure its banks, while the limitation period for interest due on securities maturing at the time of default is five years.

The war between Hezbollah and Israel has taken a heavy toll on the Lebanese economy. GDP is expected to decline by 7 percent this year, according to the World Bank, which has estimated losses and damage from the war at more than $8.5 billion.

The surplus of more than $5 billion recorded by the balance of payments over the first 8 months of 2024 is mainly explained by a change in the method followed to calculate it.