BEIRUT (AP) — The Lebanese government’s delay in implementing much-needed reforms is exacerbating the country’s economic collapse, the International Monetary Fund said Wednesday, even as officials meet to discuss an urgent and long-delayed rescue package.
The IMF’s statement follows a three-day visit to Beirut by IMF representatives to discuss with Lebanese officials the implementation of reforms under a staff-level agreement reached between the two sides in April.
“Despite the urgent need for action to address Lebanon’s severe economic and social crisis, progress in implementing the reforms agreed in the April SLA remains very slow,” the IMF said.
Before the bailout was finalized, the Lebanese government had done little to implement the IMF’s requirements for the deal, which lays out five “key pillars” that should be implemented. These include restructuring Lebanon’s troubled financial sector, implementing fiscal reforms, restructuring external public debt, and implementing strong anti-corruption and anti-money laundering measures.
Lebanon’s economy has been in free fall since late 2019, in what the World Bank described as one of the world’s worst economic collapses since the 1850s. The crisis is rooted in decades of corruption and mismanagement by the political class that has run the small country since the end of the 1975-90 civil war.
Ernesto Ramirez Rigo, head of the IMF team, said: “The Lebanese economy remains severely sluggish due to much-needed economic reforms and an ongoing stalemate caused by high levels of uncertainty.”
Lebanon’s gross domestic product has contracted by more than 40 percent since 2018, inflation remains in triple digits, foreign reserves are dwindling, and the parallel exchange rate hit a new low of 38,000 Lebanese pounds per dollar this week, the IMF said.
“Public sector institutions are failing and essential services to the population are being slashed amid a slump in incomes and a massive suppression of spending,” said Ramirez Rigo. “Unemployment and poverty rates are at historic levels. high.”
The visit comes a week after local lenders imposed informal capital controls since the start of the economic crisis, and angry savers stormed at least seven bank branches to access their trapped savings.
The IMF statement said the huge losses in the banking sector need to be “recognized and addressed in advance, while respecting the level of claims. Small savers must be adequately protected.”
On Wednesday, the Lebanese Banks Association said bank branches would not open on Thursday as planned, but would remain closed “because of the potential danger to employees and customers”. It said banks would remain closed until reassurances were obtained from state and security agencies.
Earlier on Wednesday, judicial authorities ordered bail for two men involved in a bank robbery last week. The two men were ordered banned from leaving the country for six months.
Lebanon wants to pass key IMF-requested reforms by the end of October if there is “political will” for a long-delayed but much-needed bailout, Lebanon’s caretaker Economy Minister Amin Salam said on Tuesday .
Salam added that the implementation of the reforms would provide Lebanon with about $4 billion and free up billions of dollars from international governments and institutions. The governor of Lebanon’s central bank estimates that the country needs at least $12 billion to jump-start its economy.
