Washington DC:
An International Monetary Fund (IMF) mission, led by Mr. Ramirez Rigo,
conducted virtual discussions from January 24 to February 11, 2022 with
the Lebanese authorities on the framework and policies of an economic
reform program that can be supported by the IMF. Engagement with the
authorities will continue over the coming weeks.
At the end of the discussions, Mr. Ramirez Rigo issued the following
statement:
“The unprecedented and complex nature of the Lebanese crisis requires a
comprehensive economic and financial reform program to
stabilize the economy, address deep-seated challenges, and lay the ground
for sustainable and strong growth. Obtaining broad based buy-in for this
multi-year program will be fundamental for its timely and decisive
implementation. At the same time, strong upfront actions will be necessary
to start turning the economy around and rebuilding confidence.
Lebanon’s economic program would need to include targeted and timebound
actions across the following five pillars:
- Fiscal reforms that ensure debt sustainability but also space to invest
in social spending and reconstruction efforts.
- Restructuring of the financial sector to strengthen confidence and
support the recovery.
- Reforming state-owned enterprises, and, particularly, the energy sector
to provide better services without draining public resources.
- Strengthening governance, anti-corruption, and AML/CFT frameworks to
enhance transparency and accountability
-
A credible monetary and exchange rate system.
“During the mission, progress was made in agreeing on these necessary
reform areas, although more work is needed to translate them into
concrete policies. There is a clearer understanding of the unprecedented size of the
financial sector’s losses that would need to be addressed transparently
consistent with the hierarchy of claims while protecting small depositors,
as already envisaged by the authorities. The 2022 emergency budget presents
an opportunity to start addressing the dire fiscal situation while being
mindful of the financing constraints.
“It will be important to develop a medium-term fiscal strategy that allows
the government to invest in critically-needed social spending to support
the people of Lebanon -- and enables reconstruction efforts -- while being
consistent with debt sustainability. The authorities’ plans to strengthen
competition and start addressing the energy sector problems are a promising
start, although careful sequencing and strong implementation are required.
Finally, decisive action by the authorities is needed to tackle the
deep-seated problem of corruption and strengthening transparency, including
by accelerating the launch of the procurement commission and lifting the
bank secrecy law or amending it in line with international best practice.
“The IMF team welcomes the open and constructive discussions with the
Lebanese authorities
, as well as representatives of civil society and the private sector, which
have enriched our understanding of the situation. The team will remain
closely engaged, and discussions are continuing, to help the authorities
formulate a reform program that can address Lebanon’s economic and
financial challenges.”
