Moody’s Investors Service downgraded the ratings of three Lebanese banks after pushing the world’s third highest indebted country further into junk territory over concerns of a debt default. The ratings of Blom Bank, Byblos Bank and Bank Audi were lowered to Caa1 from B3 and Moody’s changed their outlook to stable from negative, the agency said in a statement. “All three banks have high exposure to the Lebanese sovereign that is multiple times their equity, through holdings of government securities and placements at the central bank of Lebanon (Banque du Liban, BdL),” Moody's said. "This exposure links the banks' creditworthiness with that of the heavily-indebted Lebanese government, constraining their ratings, while also exposing the banks to liquidity and interest rate risks.” Moody’s downgrade of Lebanon earlier in the week puts the country on par with Gabon, Zambia, Iraq and Ukraine. 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 of about 150 per cent. The country 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 Lebanese banks face headwinds in attracting deposits because of the political impasse in the country, low economic growth, rising global interest rates and tighter emerging market liquidity,” Moody’s said, adding “a sustained slowdown in deposit inflows or capital outflows remain the key downside risk for banks and the sovereign." Lebanon depends on hundreds of thousands of workers abroad who send as much as $1 billion a month back to the country and help the country finance its debt burden. The country's dependence on the remittances makes it vulnerable to economic downturns and geopolitics. "Continued heightened political uncertainty can maintain such a slowdown in deposits, while conversely the formation of a new government tied with meaningful fiscal reforms to unlock donor funding for Lebanon would support macroeconomic stability, raise the prospect for new deposit inflows and potentially reduce the risk premia banks need pay for new deposits,” Moody's said. The country's existing woes worsened when earlier this month the country’s finance minister spooked markets with off the cuff 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. 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. Saudi Arabia, the Arab world's largest economy, as well is prepared to support Lebanon “all the way”, the kingdom’s finance minister Mohammed Al Jaadan told CNBC this week. 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.