IMF says it is ready to help Lebanon but urges leaders to carry out needed reforms
The International Monetary Fund said it is ready to help Lebanon manage its current crisis but called on the country’s leaders to carry out the necessary reforms to gain access to assistance worth billions of dollars.
“Over the last months, we have been engaged intensely with the Lebanese authorities, as well as with civil society and the international community, on a reform package aimed at addressing the deepening crisis, strengthening governance and accountability and restoring confidence in the economy,” said the fund’s managing director Kristalina Georgieva.
“Unfortunately, these discussions have yet to yield results. We are ready to redouble our efforts.
“But we need unity of purpose in Lebanon. We need all institutions to come together determined to carry out much-needed reforms.”
Ms Georgieva was speaking after an international donors conference on Sunday.”
Lebanon has been left reeling by a huge explosion in Beirut that killed more than 150 people and wounded about 6,000 last week. The explosion was caused by the ignition of 2,750 tonnes of ammonium nitrate stored in a warehouse and was heard as far away as Cyprus.
The blast caused billions of dollars in damages and the final bill could be as high as $15 billion (Dh55bn), according to various estimates.
Before the explosion, Lebanon held talks with the fund over a $10bn bailout package but negotiations stalled.
The IMF listed a number of reforms that the country needs to put into effect be granted access to the funding.
It said Lebanon should restore the solvency of its public finances and ensure that its financial system is sound to protect the savings of Lebanese depositors.
“Those who benefited from past excessive returns need to share the burden of bank recapitalisation,” the IMF said.
The fund also urged the country to put temporary controls in place to avoid continued capital outflows through reforms to its banking sector.
“This includes adopting legislation to formalise capital controls in the banking system and eliminate the current multiple exchange rate system to help protect Lebanon’s international reserves while reducing rent-seeking [behaviour] and corruption.”
The country should also push to cut losses across its stateowned enterprises through comprehensive audits of key institutions such as the central bank, the fund said.
The IMF said an expanded social safety net should also be put in place to protect the most vulnerable sections of society.
“Commitment to these reforms will unlock billions of dollars for the benefit of the Lebanese people. This is the moment for the country’s policymakers to act decisively. We stand ready to help,” Ms Georgieva said.
More than 30 international leaders and government officials participated in a virtual aid conference on Sunday to raise funds to help Lebanon. Many countries have already extended assistance to the country. The UK pledged £20 million (Dh95.8m) while Germany pledged €10m (Dh43.3m) towards the reconstruction of blast-damaged areas. The European Commission pledged €30m.
Proper oversight of how aid will be disbursed is important for donors and Lebanese protesters concerned about corruption.
“Ensuring an efficient and co-ordinated response in the aftermath of this catastrophic explosion is critical,” Axel van Trotsenburg, the World Bank’s managing director of operations, said.
“[About] 45 per cent of Lebanese citizens live in poverty. With so many left behind, it comes as no surprise that people in Lebanon are calling for profound reforms that will address the core problems of these crises and provide a real possibility for improving the daily lives of the average citizen.”
Lebanon has one of the highest debt-to-gross domestic product ratios in the world. The Lebanese pound, which has been pegged to the dollar since 1997, has plunged by more than 80 per cent since the start of the year, while year-onyear inflation hit 90 per cent in June and unemployment has increased.
The World Bank said it began a Rapid Damage and Needs Assessment last Thursday that may help serve as a basis for the country’s reconstruction plan.
“In the short term, and if the government is willing to move quickly, we can finalise preparation of an emergency social protection programme of over $200m that could benefit over half a million of poor people,” Mr Trotsenburg said.
“We stand ready to work on a fast-track basis and engage on the reform agenda that will help ease the suffering of the people of Lebanon.”
The IMF urged Lebanon to cut the losses of its state-owned enterprises through comprehensive audits of key institutions