The International Monetary Fund (IMF) has recently stated that Lebanon’s economic reforms are not going to be enough to get the nation out of its current economic crisis.
The director of the IMF mission in Lebanon, Ernesto Ramirez Rigo, stated in a statement that the West Asian country’s continued refugee crisis, border conflicts with Israel, and the fallout from the Gaza war are making the already terrible economic situation worse.
Since the Gaza War began in October 2023, fighting between Israeli forces and Hezbollah in Lebanon has taken place across the West Asian country’s southern border.
In addition to causing harm to southern Lebanon’s infrastructure, agriculture, and trade, the fighting “has internally displaced a substantial number of people.” The severe dangers connected to the conflict, along with a drop in tourism, significantly cloud the economic picture, according to Rigo.
According to Rigo, the central bank and the finance ministry of Lebanon have implemented monetary and fiscal reforms, such as measures to stabilise the Lebanese pound’s fluctuating exchange rate and prevent a currency collapse. These measures have assisted in lowering inflationary pressure.
But he asserted that more work must be done if Lebanon is to see a reduction in its financial difficulties.
“These legislative actions don’t go far enough to facilitate the crises’ eventual recovery. Since the government and parliament have been unable to resolve the financial problem, bank deposits are still blocked and the banking industry is unable to lend money to the economy,” he continued.
“To create the groundwork for economic recovery, it is imperative to address the banks’ losses while safeguarding depositors to the greatest extent feasible and restricting access to limited public resources in a financially sound and trustworthy way,” Rigo added further.
Over 80% of the population now lives below the poverty line, banks have locked most depositors out of their investments, and Lebanon’s currency has lost almost 95% of its value since the country’s economy started to collapse in 2019.
Decades of extravagant spending and corruption by the ruling class, some of whom ran banks that made large loans to the government, caused the crisis to blow up.
Government estimates place the total losses in the financial sector at above USD 70 billion, with the central bank bearing the lion’s share of these losses.