The International Monetary Fund and Lebanon have reached a tentative agreement on Economic Policies with Lebanon for a Four-Year Extended Fund Facility. However, financial experts and analysts remain unconvinced that the Lebanese political elite, widely criticized for rampant corruption, will implement the reforms outlined in the IMF program.
Nasser Saidi, a finance professional and former vice governor of Lebanon’s central bank, is among those who are skeptical that such a large-scale reform will ever take place. “This is good news if the set of Monetary-Fiscal-Governance-Structural reforms including banking sector restructuring are implemented. Highly unlikely!” he wrote on Twitter.
In a conditional agreement announced recently, the IMF will provide Lebanon with $3 billion in aid to help it recover from its severe economic crisis. Following a 2020 debt default, the country has suffered triple-digit inflation, the world’s highest poverty rates, and a currency collapse. “With this agreement, donor countries can begin cooperating with Lebanon and put Lebanon back on the global finance map,” Prime Minister, Najib Miqati told reporters after the IMF announced the “staff-level agreement.”
Lebanon is facing a severe financial crisis, resulting in a sharp increase in poverty, unemployment, and exodus. This crisis is a culmination of deep and pervasive imbalances generated by inefficient macroeconomic policies resulting in large twin deficits (fiscal and external). Apart from the IMF loan, Lebanon needs donations to remain afloat and get back on track. But before all this, they need to address the systemic governance and corruption challenges and lack of fundamental reforms.