On Wednesday, a delegation from the International Monetary Fund began a new mission in Lebanon, which is mired in… An unprecedented economic crisisAs part of negotiations to reach an agreement on a financial recovery plan, a source accompanying the file told AFP.
The source, who declined to be identified, said that “a team from the International Monetary Fund arrived in Lebanon on a two-week mission.”
Since 2019, Lebanon has witnessed an unprecedented economic collapse, which the World Bank has ranked among the worst in the world since the middle of the last century. This is accompanied by political paralysis that prevents taking reform steps that limit the deterioration and improve the quality of life of the population, more than 80% of whom live below the poverty line. In 2020, Lebanon defaulted for the first time on its foreign debt.
“We hope to reach a preliminary agreement within two weeks of discussions,” Deputy Prime Minister Saadeh al-Shami, who is leading the negotiations from the Lebanese side, told AFP.
The delegation headed by Ernesto Ramirez began its mission in Beirut by meeting President Michel Aoun, according to what the Lebanese presidency announced, noting that the discussion dealt with “the course of negotiations with the Lebanese side to launch an economic and financial recovery plan.”
On February 11, the Fund announced a roadmap that it presented to Lebanon, stressing that “the unprecedented magnitude of losses in the financial sector must be dealt with in a transparent manner while protecting small depositors.”
The IMF reiterates that it will not provide any financial support as long as the Lebanese government does not agree to initiate ambitious reforms necessary to get the country out of the economic crisis, on top of which is correcting the budget, restructuring the banking sector, reforming public institutions, and firmly addressing rampant corruption.
The Lebanese negotiators agreed to estimate the size of the financial losses at 69 billion dollars, without agreeing yet on how to distribute them.
The political division and disagreement in viewpoints prevent the implementation of the required reforms, especially the adoption of a proposed law to restrict deposits, or what is known as “Capital Control”.
Prime Minister Najib Mikati said following leaving a legislative session of Parliament on Tuesday that the government had added the IMF’s notes to a proposed law that had been before Parliament two months ago, but Parliament asked once more to refer it as a draft law for study.
In statements to reporters, he expressed his displeasure at the difference in attitudes between the government and parliament. “The problems we suffer cannot be solved by the populist way we are witnessing, and the country is paying the price today,” he said with emotion, stressing that “if we do not all unite to find solutions, we cannot get out of the crisis we are going through.”
In a statement to AFP, financial expert Mike Azar said that this discrepancy may constitute an “indicator of what might happen later,” following similar discrepancies toppled negotiations conducted by the previous government with the Fund.
“If an agreement is reached (with the fund), there will remain major challenges, as the Council of Ministers and Parliament must approve” the program, he added.
Advance legislation and reforms should also be passed and put into practice before the IMF asks the Board of Directors to approve the financing package.
He warns that in the absence of a “political will,” the agreement may remain “a dead letter.”
