Lebanon must do more to address economic crisis, IMF says

International Monetary Fund staff conclude mission to country’s new government

An IMF sign at the fund's headquarters in Washington. Reuters

The International Monetary Fund on Thursday said the reforms implemented by Lebanon's new government do not go far enough to address the country's protracted economic crisis.

The message from the Washington-based lender comes after a “fact-finding” mission by its staff in Beirut this week. During the March 10-13 mission, IMF staff held discussions with President Joseph Aoun, Prime Minister Nawaf Salam, Speaker Nabih Berri, and Lebanon's central bank and cabinet members.

Mr Aoun was named Lebanon's President this year, ending a power vacuum that had existed since 2022. He moved quickly to select Mr Salam as Prime Minister and the cabinet held its first meeting last month.

The new government has boosted hopes that Lebanon could be lifted out of the financial crisis it has been in since 2019. Finance Minister Yassine Jaber has said he expected there to be a new deal between Beirut and the IMF, local media reported on Wednesday.

The IMF staff report said recent action by the new government has helped to “maintain some degree of economic stability”, pointing towards falling inflation and a more stable exchange rate. Revenue collection has also improved, it said.

“However, these steps are insufficient to address the ongoing economic, financial and social challenges,” Ernesto Ramirez Rigo, IMF mission chief to Lebanon, said in a news release. “A comprehensive strategy for economic rehabilitation is critical to restore growth, reduce unemployment and improve social conditions.”

While IMF staff welcomed the government's request for a new programme to help address Lebanon's challenges, the country's economy remains “severely depressed”, while poverty and unemployment remain high.

The World Bank has said Lebanon's real economy contracted by 7.1 per cent in 2024 because of Hezbollah's conflict with Israel. Its gross domestic product has declined by about 40 per cent since 2019.

“The banking sector collapse continues to hamper economic activity and provision of credit, with depositors unable to access their funds,” Mr Rigo said.

Exacerbating Lebanon's crisis is the economic toll caused by the Hezbollah-Israel war. According to a recent World Bank report, Lebanon's reconstruction and recovery work will cost an estimated $11 billion.

“Infrastructure and housing destruction and displacement resulting from the recent conflict have further exacerbated Lebanon's challenges," Mr Rigo said. “Humanitarian and reconstruction needs are substantial and require co-ordinated international support. Furthermore, Lebanon continues to host a large number of refugees, which adds a significant burden to its economy."

He said the lender would continue to remain in contact with Beirut to help develop a reform programme focused on fiscal and debt sustainability, financial sector restructuring, state-owned enterprise programmes, growth enablers and increased transparency.

“The IMF stands ready, together with the international community, to support the authorities’ efforts in addressing these challenges,” Mr Rigo said.