The International Monetary Fund on Friday said Lebanon's bank restructuring law remains a key sticking point as Beirut looks to secure a new economic reform programme with the multilateral lender.
The fund said progress was made in discussions on the country's banking sector restructuring strategy during a November 11-13 staff-level visit to Lebanon and that further engagement is expected to continue.
"However, further work is needed to reach an agreement on a strategy for an effective and durable restructuring of Lebanon’s banking sector, leading to a sound and resilient system," said Ernesto Ramirez Rigo, IMF mission chief to Lebanon.
The IMF in particular pointed to the implementation of the Bank Resolution Law and the Financial Stabilisation and Deposits Recovery Law - or the financial gap law - as "essential to restore financial stability and maximise deposits recovery" once they are adopted.
Lebanon reached an initial staff-level agreement with the IMF in 2022 after the country's economy collapsed, although the government at the time was slow to implement the fund's recommendations. Lebanon defaulted on its debt for the first time in March 2020, leading to hyperinflation, high unemployment, a surging poverty rate and depositors frozen out of their savings.
Its financial collapse generated losses of roughly $70 billion, a figure used in official estimates since 2022, although that number is now expected to be higher.
The fund said further talks are needed to maximise deposit repayments while ensuring consistency with the central bank's and the banking sector's liquidity positions, and public debt sustainability and the restoration of the central bank's solvency. The IMF also said it remains critical the Financial Stabilisation and Deposits Recovery Law "upholds the hierarchy of claims in the allocation of losses, thereby maximising protection for depositors".
Lebanon's Parliament passed a bank resolution law in August, although President Joseph Aoun appealed it to the Constitutional Council over an amendment concerning the central bank's independence and power. The fund at the time said it would assess any changes to ensure they were consistent with international standards.
"The mission looks forward to continuing the engagement with the authorities to make further progress on these fronts in the coming weeks and remains fully committed to supporting Lebanon in its efforts to design and implement a comprehensive economic reform program, in line with the IMF’s policies and mandate," Mr Ramirez Rigo said.
