4 ways in which IMF will help Lebanon manage financial crisis

Lebanese President Michel Aoun has asked ministers to draft the 2021 state budget, the information minister said after the new cabinet convened yesterday at the presidential palace.

The heavily indebted state is facing a financial crisis and must quickly decide whether to repay maturing foreign currency debt on schedule, including a $1.2 billion Eurobond due on March 9.

The government has formally requested the International Monetary Fund’s technical help in shoring up its economy, a move that a senior government source said would include the fund’s aid in drafting a plan to avert financial collapse.

“We have recently received a request from the Lebanese authorities to offer advice and technical expertise on the macroeconomic challenges facing the economy,” IMF spokesman Gerry Rice said in a statement. Here are the ways forward in which the IMF could possibly help Lebanon:

1 The IMF regularly provides advice to its member countries

on policies and reforms to restore economic stability and promote growth. The IMF statement made no mention of financial assistance for

Lebanon. “Any decisions on debt are the authorities’, to be made in consultation with their own legal and financial advisers,” Rice added.

2 As part of the request,

the senior government source said Lebanon asked the IMF to send a team to Beirut to help draw up a comprehensive plan to avoid default. The financial crisis, worse than any Lebanon endured in its 1975-90 civil war, came to a head last year as slowing capital inflows led to a liquidity crunch and demonstrations erupted against the ruling elite.

3 Deciding how to handle Lebanon’s next sovereign debt maturity

is a top priority for Prime Minister Hassan Diab’s government, which won a vote of confidence in Parliament on Tuesday. The IMF technical team is expected to arrive in Beirut in the next few days to help draw up an economic, financial and monetary plan, said the senior government source, adding that the request for help was made by phone on Wednesday.

4 It was not immediately clear

whether the technical assistance would involve a plan for debt restructuring. Some politicians have expressed support for consulting the IMF before any plan is put forward to manage the debt payments.