The IMF and Lebanon have agreed on a draft financial package, subject to modifications
The International Monetary Fund (IMF) announced on Thursday that it had reached a draft financing agreement with Lebanon, but that Beirut must first implement a series of economic changes before the pact can be approved by its board of directors. An IMF deal is widely seen as essential for Lebanon to begin to emerge from an economic meltdown that has ravaged the country since 2019, freezing savers’ money, sinking the currency and skyrocketing poverty in the worst crisis. of the country since the civil war of 1975-1990. . The IMF said in a statement that the staff-level agreement covers a 46-month extended financing facility, under which Lebanon has requested access to the equivalent of around $3 billion.
The Cabinet must also approve a “fiscal and debt restructuring strategy, necessary to restore debt sustainability”. Lebanon defaulted on its sovereign debt, including $31 billion in dollar bonds, in March 2020. Other steps include parliamentary approval of a reformed bank secrecy law, l completion of an audit of the central bank’s foreign asset position and “initiation of a bank-by-bank assisted assessment for the 14 largest banks”. President Michel Aoun and Prime Minister Najib Mikati affirmed their “close cooperation, in collaboration with the parliament, to ensure a rapid implementation of the measures, including the adoption of the legislation necessary to make this program a success” , says a tweet from the presidency account. .
But that hinges on Beirut implementing reforms that include measures its ruling politicians have failed to adhere to since the crisis erupted. While Lebanese leaders hailed the preliminary deal and said they were ready to make it a success, some analysts doubted politicians could deliver on its promises after more than two years of inaction. Lebanese authorities have agreed, before the IMF board considers whether to approve the deal, to carry out eight reform measures, the fund said. These include a plan to deal with the huge losses in the financial system, which collapsed in 2019 due to massive public debts accumulated by decades of corruption and waste. The Cabinet must approve a bank restructuring strategy that “recognizes and addresses significant sector losses from the outset, while protecting small depositors and limiting the use of public resources”, the fund said.
Speaker of Parliament Nabih Berri said the legislature was ready to work “very seriously” to make the program a success. Toufic Gaspard, a former adviser to the IMF and the Lebanese Ministry of Finance, said that even if half of the reforms were implemented, “it would be music to the ears of the Lebanese”. But he added that the measures “would be a major source of concern for the authorities as they need to implement many reforms before they even come before the IMF board. “This is a major political challenge, and the long list of substantial reforms to be implemented before they even come before the council rightly reflects a lack of confidence in the authorities,” he said. .
Legislative elections are scheduled for May 15, after which a new government will have to be formed – a process that usually takes several months in Lebanon – potentially another complication to the implementation of the agreement. The IMF statement said the facility will also depend on the enactment of economic reforms aimed at restoring financial sustainability, strengthening governance and transparency, and removing obstacles to job-creating growth.
Summary of news:
- The IMF and Lebanon have agreed on a draft financial package, subject to modifications
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