IMF: Lebanon has taken 'very limited policy action' to address economic crisis

Financial agency released its first comprehensive assessment since collapse began in 2019

Bank customers protest against the monetary policies of Lebanese Central Bank governor Riad Salameh in Beirut last Friday. EPA

The International Monetary Fund said that Lebanon has taken “very limited policy action” to address the dire economic situation the country finds itself in.

In its first comprehensive financial assessment since Lebanon's collapse began in 2019, the IMF warned that further delays in taking decisive action would lead to an even murkier future.

The IMF said the delay had led to a decrease in the foreign currency deposits that could eventually be recovered when the banking sector is restructured, adding that $10 billion less could be recovered now than in 2020.

Without reforms, public debt could reach 547 per cent of GDP by 2027, the IMF said in its Article IV report.

“The continuation of the status quo presents the largest risk to Lebanon's economic and social stability, taking the country down an unpredictable road,” the IMF said.

Mission chief Ernesto Rigo said that Lebanon's current account balance was “very disappointing in 2022” and that it was also discouraging that the country still had yet to pass a 2023 budget.

“The situation is very dire,” he added.

The IMF reached a staff-level agreement with Lebanon last year over a rescue package, but the latter has failed to implement almost all of the reform measures required to secure the bailout.

The IMF said the measures Lebanon had attempted so far, including the 2022 budget, a banking secrecy law and a draft capital controls law, fell short of what was required.

“While acknowledging the complex political setting, [the IMF Executive] Directors regretted the very limited policy action taken to address the crisis,” the report said.

“They highlighted the risks and surging costs from further delays and urged decisive implementation of a comprehensive reform plan to resolve the crisis and bring about a sustainable recovery.”

The economic crisis has been blamed on decades of mismanagement and corruption by Lebanon's ruling elite. It has seen the local currency plummet in value compared to the US Dollar on the parallel market by about 98 per cent, and led to widespread shortages of basic essentials.