Lebanon's economic crisis: the country is living in a "very dangerous moment", warns the IMF

Protest against the deteriorating economic situation, in Riad al-Solh Square in Beirut, Lebanon, March 22, 2023. © MOHAMED AZAKIR / REUTERS

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The "country of the cedar" reached an agreement in principle with the IMF in April 2022, but must undertake crucial reforms to unlock aid to revive the country's economy, where more than 80% of the population now lives below the poverty line, according to the UN.

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Lebanon, where the economic crisis is worsening day by day, is experiencing "a very dangerous moment", warned on Thursday, an official of the International Monetary Fund (IMF), deploring the slow implementation of reforms by political leaders. Ernesto Ramirez Rigo has just completed a mission to Beirut, during which he met with several officials as well as diplomats.

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The implementation process The necessary reforms "has been very slow," the official added. "We are in a situation where the status quo ... and the policy of inaction will leave Lebanon plunged into an endless crisis. »

The agreement in principle, reached in April 2022 with the IMF, covers $<> billion in aid over four years, but is conditional on the implementation of reforms, including an amendment to the bank secrecy law or a restructuring of the banking sector, as well as a capital control law.

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Time is running out, it's been almost a year since we reached an agreement," said Ernesto Ramirez Rigo. The Lebanese have made progress, but unfortunately that progress is very slow.

This is not the first time that the Fund has denounced the slowness of the Lebanese authorities in implementing these reforms, while the country is experiencing one of the worst global economic crises since 1850, according to the World Bank. Since 2019, Lebanon has been plunged into a deep economic crisis blamed by a large part of the population on the mismanagement, corruption, negligence and inertia of a ruling class that has been in power for decades.

A political crisis that does not help

The political crisis in Lebanon aggravates the situation, with MPs unable to agree to elect a new President of the Republic since November. The country is ruled by a resigning government with reduced powers.

The local currency has lost more than 98% of its value against the dollar on the parallel market, while draconian banking restrictions prevent savers from having free access to their money. If the status quo continues, the country could go "towards hyperinflation in the worst case," the IMF official warned.

Among the most sensitive issues is the distribution of losses in the banking sector. Referring to "the magnitude of the losses for a country as small as Lebanon", Mr. Ramirez Rigo said that they "will have to be shared among everyone [...] Government, banks and savers ». He stressed, however, that "small savers have been hardest hit by the crisis [...] They suffer more than they should." Most Lebanese do not have access to their savings, which have been blocked in banks since 2019.

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With AFP)

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• Lebanon
• Economic crisis
• Economy