Lebanon has agreed on a reform package to revolve its economy with the International Monetary Fund a few days ago. The agreement is likely to provide the crisis-stricken country with about $3 billion in assistance over multiple years.
The deal was reached on the last day of a visit to the country by an IMF group. The IMF delegates started a series of observations and negotiations more than 10 days ago.
The new staff-level agreement must receive approval from the International Monetary Fund managerial and executive committee. Furthermore, in order for the agreement mechanism to function, the Lebanese authorities must execute a slew of reforms. Rebuilding the country’s bankrupt financial sector, increasing transparency processes, and unifying exchange rates for the Lebanese currency are among them.
If the accord receive confirmation, the IMF might provide up to $3 billion in aid for Lebanon’s economic stimulus. Over a process taking less than four years, the fund will be secured through IMF’s Special Drawing Rights.
Saadeh Al Shami, the Deputy Prime Minister in charge of discussions with the IMF, expressed confidence that Lebanon will complete all of the essential measures for the rehabilitation programme.
Al Shami issued a statement calling for complete collaboration from all parties to help the economy heal. He stated that timing is important and that there is much to be accomplished in the coming months. “The more we delay on the necessary reforms, the heavier price the national economy will pay, and as a result the people.”
“The authorities recognize the urgent need to initiate a multi-pronged reform program to tackle these challenges, bring back confidence and put the economy back on a sustainable growth path, with stronger private sector activity and job creation,” International Monetary Fund negotiating team announced in a statement following the agreement.
International Monetary Fund in Lebanon
Beginning about three years ago, Lebanese economy has been stuck in a severe catastrophe. The strength of the Lebanese currency plummeted by 90%, and over seventy percent of the people fell into destitution.
Overall economic damage in Lebanon’s banking system are estimated to be about $69 billion, according to authorities. In order for the International Monetary Fund board to authorize the loans, the government accepted to complete eight critical changes.
Among the measures are passage of the national budget for the current year and a forensic examination of central bank. Furthermore, Lebanon is committed to reforming bank secrecy rules to combat financial crime, as well as restructure the banks.
By the way, Lebanon has already struggled to complete a number of crucial institutional adjustment. The moves would allow it to access billions of dollars in foreign aid and resurrect its economic system.
While authorities have expressed optimism that Lebanon will undertake the necessary reforms, government opponents and academics have expressed reservations. “The Lebanese political system in its current form will be unable to undertake the critical reforms as it would undermine its core foundations, namely the entrenched interests of the elites and the balance of powers within it,” a Lebanese economist and political analyst asserted.
The accord with the International Monetary Fund is expected to be Lebanese leaders’ strategy to secure votes in legislative elections. It seems suitable time a month before the elections. This is comparable to the CEDRE summit in 2018, when the Lebanese administration secured $11 billion in commitments. The fund never realized as the authorities never implemented the reform system.
Everything in Lebanon, from economy to health and social welfare are under the heavy burden of political agenda. Lebanon must overcome the power contest before any other move.