The International Monetary Fund is ready to continue working with Lebanon on helping it overcome its worst financial crisis in three decades, but urged authorities to unite around the government’s rescue plan and engage in a "productive discussion".
"From our side, we are ready to work together with the authorities to improve the [government] plan where this is necessary," Athanasios Arvanitis, deputy director of the IMF's Middle East and Central Asia Department, said at a press conference on Monday. "We believe that the government's original plan went into the right direction … it provided an assessment of challenges and an estimate of financial losses."
After defaulting on $31 billion (Dh114bn) of eurbonds in March, and its currency losing more than two thirds of its value against the US dollar, Lebanon asked the IMF in May for a $10bn of emergency funding to pull its economy out of a downward spiral.
The Lebanese government’s rescue plan has served as a blue print for talks between Beirut and the IMF. It gives an overview of the magnitude of the country's economic troubles and massive losses it is facing in the financial system.
However, IMF's talks with the government, the central bank, different political factions and commercial banks have made little progress so far. The scale of financial losses has so far proven to be the sticking point for different stakeholders.
Leaks to the Lebanese media point to diverging views on the size of the losses. Reports say the IMF estimates the size of the losses far greater than the central bank's projections, which explains the difference as a matter of accounting.
Mr Arvanitis warned that attempts to misrepresent the magnitude of losses or delaying the reform process would add to the economic woes of the country.
“We are worried that attempts to present lower losses and postpone difficult measures into the future would only [add to the] cost of the crisis [and] delaying recovery,” he said.
Last month, Alain Bifani, who served for 20 years as the director-general of the Lebanese ministry of finance resigned as a result of the stalled IMF-government talks. Mr Bifani, a former Arthur Andersen executive and banker with ABN Amro, who was also a consultant to the United Nations Development Programme, is a respected figure and considered impartial.
Lebanon’s public debt is projected to climb to 161.8 per cent of gross domestic product in 2020 from an estimated 155 per cent last year, according to the IMF. That ranks it as the third-highest debt-to-GDP ratio in the world after Japan and Greece.
The IMF expects the country’s economy to contract 12 per cent this year. Inflation soared to 56 per cent in May and the country faces a liquidity crunch with the Lebanese pound losing more than 80 per cent of its value against the greenback in the black market.
“We believe that an economic reform programme needs to stop the immediate deterioration of economic conditions, support the most vulnerable from the impact of the crisis and lay the conditions for sustainable growth,” Mr Arvanitis said.
The programme in our view needs to offer a comprehensive strategy to restructure public debt, strengthen the fiscal framework, recapitalise banks, reform key parts of the economy, particularly the state owned enterprises, and improve … transparency.”
