IMF's 'rocky' relationship with Lebanon: Can a new agreement break the cycle of failed reforms?

Report by Bassam Abou Zeid, English adaptation by Karine Keuchkerian

The International Monetary Fund's (IMF) experience with Lebanon has been unsuccessful both before and after the financial and economic crisis.

Before the crisis broke out in October 2019, the IMF warned about the cost of policies to stabilize the exchange rate, national debt, and budget deficit, urging the implementation of reforms, but there was no response.

After the crisis, the IMF called for the adoption of a financial and economic recovery plan. Once again, however, "no one listened." 

The plan was not adopted, the capital control law was not passed, the banking sector was not restructured, and the exchange rate remained ununified for a long period.

Despite this, in April 2022, a preliminary agreement was reached between the Lebanese government and the IMF, paving the way for a program under which Lebanon would borrow $3 billion and rebuild trust with the world. 

However, once again, internal interests and disputes stalled the program, and today, it has become outdated and irrelevant.

Now, an IMF delegation has returned to Beirut. They have renewed their willingness to cooperate and negotiate with the relevant parties to reach a new agreement that would allow Lebanon not only to borrow funds but also to open the door to other financial contributions. 

However, the delegation has conditioned this on the presence of a financial and economic recovery plan agreed upon by all stakeholders, including the government, parliament, central bank, commercial banks, and depositors. 

The plan must clearly outline how to address the deposit crisis and the timeframe for resolving it.

The IMF delegation also conditioned the Lebanese parliament's approval of financial reform laws, with the most important being the restructuring of the banking system and addressing the gaps in the banking secrecy law, an issue on which the IMF had previously raised written concerns.

This attempt by the IMF comes under circumstances different from those during the economic crisis. 

The political balance in Lebanon has shifted, and Arab and international attention has returned strongly, as evidenced by the IMF delegation's meetings with Saudi Ambassador Waleed Bukhari and their ongoing communication with the economic team at the French Embassy, as well as the influential role of the United States in shaping the IMF's steps and decisions.

The question now is whether those who previously obstructed financial reforms will understand that the "game over" is here and that no progress can be made without reforms and stability, which must be enforced by Resolution 1701.