Lebanon hopes for new staff-level agreement with IMF

Lebanon is seeking a new staff-level agreement with the International Monetary Fund (IMF), Finance Minister Yassine Jaber stated. He emphasized that a comprehensive IMF program still necessitates passing a final law to address losses from the country's financial crisis. Lebanon previously signed a staff-level agreement with the IMF in April 2022, more than two years after its financial system collapsed due to years of reckless spending and corruption in the ruling elite.

However, the country has been slow to implement the promised changes. The current government has expedited reforms, including a bank restructuring law welcomed by the IMF in August. Jaber visited Washington on Monday to meet with IMF Managing Director Kristalina Georgieva. He told her it was crucial to commence work on a full IMF program, which is expected to involve loans, as Lebanon has diligently pursued financial reforms over the past 18 months.

Jaber informed her that passing the financial gap law, aimed at distributing losses from the 2019 crash, is essential before a full-scale agreement with the IMF can be achieved. In 2022, the government estimated the losses at about $70 billion, a figure likely to increase now. Those losses must be distributed among the state, the central bank, commercial banks, and depositors to gradually restore their savings.

A staff-level agreement could be signed as early as Monday, according to a source familiar with the process, but it is more probable by the end of the year. However, a full IMF program would take longer as it requires approval by the IMF board. The government submitted a financial gap bill last year but it has not yet been approved.

Financial reforms have been repeatedly obstructed by political and private interests over the last seven years.