Caused by decades of mismanagement and corruption by a ruling class largely unchanged for decades, the crisis has been exacerbated by the pandemic and now by the war in Ukraine.

The IMF demanded a strong commitment from Beirut to implement the ambitious reforms necessary to tackle, in particular, the restructuring of the financial sector and corruption.

Lebanese Prime Minister Najib Mikati welcomed this agreement and "the necessary reforms, which are in reality a visa for donor countries to start cooperating with Lebanon and put it back on the map of global finance".

But experts are skeptical about the will of the political class to carry out these reforms.

Shortly after the IMF announcement, Saudi Arabia announced the return of its ambassador to Lebanon after months of diplomatic crisis between Beirut and Gulf countries, and the Kuwaiti ambassador was also due to return this week.

Granted for a period of four years under the extended credit mechanism, the aid plan must first receive the approval of the management of the IMF and its board of directors, the Fund said in a press release.

"The Lebanese authorities have agreed to undertake several key reforms ahead of the meeting of the IMF's board of directors," he said.

In particular, the authorities must get Parliament to adopt legislation aimed at restructuring the banking sector and "reviving the process of restoring the financial sector, which is fundamental to sustaining growth", the Fund detailed.

Beirut had estimated at the beginning of the year the losses of the financial sector at 69 billion dollars (60 billion euros).

It is this amount that had been retained as the basis for negotiation with the IMF.

Photo provided by the Lebanese Dalati and Nohra agency of President Michel Aoun (left) and Prime Minister Najib Mikati at the presidential palace in Baabda, near Beirut, April 7, 2022 - DALATI AND NOHRA/AFP

The Lebanese Parliament must in particular amend the bank secrecy law "in order to bring it into line with international anti-corruption standards and remove obstacles to effective restructuring and supervision of the banking sector", continued the Fund, which did not give a deadline for its board meeting.

Skeptical experts

The Lebanese state defaulted on its sovereign debt in March 2020 for the first time in its history.

Five months later, the explosion in the port of Beirut had further aggravated the situation.

As early as the spring of 2020, Beirut turned to the IMF for help.

But formal talks only started on January 24.

The extended credit facility "aims to support the authorities' reform strategy to restore growth and financial viability, strengthen governance, transparency and increase social and reconstruction spending", specifies the Fund.

This program should, however, be supplemented by the restructuring of Lebanon's external public debt with the aim of involving creditors sufficiently to restore debt sustainability, the IMF continued.

But Nasser Saidi, a former deputy governor of the Central Bank of Lebanon, says he doubts the reforms will materialize.

"It's good news if the monetary-fiscal-structural and governance reforms are carried out. Very unlikely!", He wrote on Twitter.

"Lebanon is facing an unprecedented crisis, which has led to a dramatic economic contraction and a sharp increase in poverty, unemployment and emigration," Ernesto Ramirez Rigo, the IMF's mission chief, told AFP. outcome of the visit which ended on Thursday.

About 80% of the Lebanese population is indeed plunged into poverty.

The IMF official stressed that this crisis is "a manifestation of the deep and persistent vulnerabilities generated by many years of unsustainable macroeconomic policies that have fueled large deficits".

He also referred to an overvalued exchange rate and an oversized financial sector and noted "serious problems of accountability and transparency".

In Beirut, Lebanese President Michel Aoun and Mr. Mikati said in a statement that the agreement with the IMF would help "revive Lebanon and put it on the road to recovery and solutions."

But for financial analyst Henri Chaoul, this agreement is a "non-event".

"We are light years away," he told AFP.

"We have 30 years of experience with a perfectly fitting regression line."

© 2022 AFP