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Lebanon needs deep reforms on unstable outlook says IMF

Saudi Arabia IMF GDP Reuters/Yuri Gripas
The lack of political will to make difficult, yet critical, decisions to launch reforms leaves Lebanon with an impaired banking sector, said IMF mission chief Ernesto Rigo

The International Monetary Fund (IMF) has welcomed new policies enacted by Lebanon’s central bank, but said deep reforms were still necessary as the crisis-stricken country’s “outlook remains difficult and unstable”.

Lebanon’s nearly four-year economic meltdown has cost the local currency roughly 98 percent of its value and impoverished thousands, but authorities have been slow to enact reforms.

That inaction “will weigh on the economy for years to come”, said IMF mission chief Ernesto Rigo in a written statement at the end of a visit to Lebanon.

“The lack of political will to make difficult, yet critical, decisions to launch reforms leaves Lebanon with an impaired banking sector, inadequate public services, deteriorating infrastructure, worsening poverty and unemployment conditions, and a further widening of the income gap,” he said.

Lebanon has not put in place a plan to restructure its banking sector and has not passed a capital controls law or a 2023 budget. The current draft budget “remains lacking in terms of timeliness and coverage”, the IMF said on Friday.

The statement said Lebanon’s central bank – now headed by acting governor Wassim Mansouri – had taken “steps in the right direction”, including phasing out a controversial exchange platform and curbing monetary financing of the government.

It said more steps, including the unification of varied exchange rates, were still needed.

Lebanon’s caretaker finance minister, Youssef Khalil, said the IMF’s assessment was “accurate” and urged parliament to pass the necessary reform laws.