S&P lowered its ratings on several Lebanon government bonds, as the country's economy teeters on collapse and the government struggles to meet debt obligations. The credit rating agency slashed the issue rating to 'D' from 'CC' on bonds which had their coupon payments due in May and June, S&P said on Sunday. The 10 bonds ranged $250 million (Dh917.5m) to $1 billion in size, with different maturities from 2022 to 2035. On June 19 the Lebanese government missed the principal payment on a $600m eurobond, following its first default on March 9 on a $1.2bn issue. The government has also missed interest payments on several other bonds in May and June. In March Lebanon's government said it would stop paying all its commercial foreign currency debt obligations of about $31bn. “The Lebanese government, under prime minister Hasan Diab and with the support of external advisors, has thus far made only limited progress in engaging creditors on debt restructuring negotiations,” S&P analysts Zahabia Gupta and Trevor Cullinan wrote in the report. “In the absence of a comprehensive restructuring plan backed by all key political institutions and parties, and external support, we continue to expect the negotiation process will be drawn out beyond 2020.” The ratings agency affirmed Lebanon's long- and short-term foreign currency sovereign credit ratings at selective default. It also affirmed Lebanon’s long- and short-term local currency ratings at 'CC/C' with negative outlook. The negative outlook reflects the government’s likely decision to restructure its local currency debt as part of a broader restructuring program, S&P said. Lebanon’s woes are compounded by the Covid-19 pandemic, which has dealt a further blow to an already weak economy and severe external, fiscal, and financial constraints. The country’s private sector economy continued to contract in June, albeit at a softer pace, as weak demand and a sharp fall in output worsened business conditions. The Blom Lebanon PMI index, improved to 43.2 in June but remained well below 50 a reading above which indicates economic expansion. The country, which has suffered months of protests and political upheaval, faces its worst financial crisis in three decades. Lebanon’s public debt is projected to climb to 161.8 per cent of gross domestic product in 2020 from an estimated 155 per cent last year, according to International Monetary Fund. That is the third-highest debt-to-GDP ratio in the world after Japan and Greece. Lebanon faces a foreign currency shortage and the pound's peg to the US dollar has weakened. The pound has lost as much as 80 per cent of its value against the greenback in the black market. S&P said a restructuring programme, when agreed, is likely to be accompanied by an official currency devaluation. “We understand the government has yet to announce any restructuring of its local currency debt obligations, which represent about 110 per cent of GDP (63 per cent of total debt),”according to S&P analysts. “Our 'CC' and 'C' ratings on Lebanon's local currency debt reflect our expectation that domestic debt restructuring is highly likely if the country is to set its public debt on a sustainable footing.” In May, Lebanon asked the IMF for a $10bn loan, but it has yet to make progress on the emergency funding arrangement and is cyrrently in discussions with the fund. The IMF forecasts Lebanon's economy to contract 12 per cent this year.