Tentative deal reached on debt
BEIRUT — Lebanon and the International Monetary Fund reached a tentative agreement for comprehensive economic policies that could eventually pave the way for some relief for the crisis-hit country, after Beirut implements wide-ranging reforms.
The four-year agreement, which is subject to approval by IMF management and executive board, was announced Thursday by Lebanese Prime Minister Najib Mikati after a meeting with IMF delegates in Beirut. He said Lebanon promised the IMF that Beirut would implement the required reforms in the small Mediterranean nation notorious for corruption.
The tentative agreement — a first step on what is sure to be a long and complicated road — provides a glimmer of hope for Lebanon, which has long been in the grips of a devastating economic crisis. The World Bank has described the crisis as one of the worst the world has witnessed in more than 150 years.
The IMF said in a statement that Lebanese authorities and the IMF team that has been in Lebanon since March 28 reached “a staff-level agreement on comprehensive economic policies” that could be supported by a 46-month Extended Fund Arrangement, or EFF, with requested access of about $3 billion.
The IMF statement said Lebanese authorities, with IMF staff support, have formulated a comprehensive economic reform program aiming to rebuild the economy, restore financial sustainability, strengthen governance and transparency, remove impediments to job creating growth, and increase social and reconstruction spending.
It is a first step on the way to an IMF bailout to Lebanon, potentially unlocking billions of dollars in loans. In order for that to happen, Lebanon would need to implement reforms, including drafting a capital control law, restructure the country’s hard-hit banking sector and amend decades-old banking secrecy laws.
A statement released by President Michel Aoun’s office said he and Mikati are “committed to resolving the crisis and putting Lebanon back on the track of growth.”
The IMF said there are “five key pillars” that should be implemented, including restructuring the financial sector and implementing fiscal reforms, along with the proposed restructuring of external public debt. They also include reforming state-owned enterprises, particularly in the electricity sector, and strengthening governance, anti-corruption, and anti-money laundering efforts.
Lebanon defaulted in March 2020 on paying back its massive debt, worth at the time some $90 billion or 170% of GDP, making it one of the highest in the world.
Lebanon’s economic crisis that began in October 2019 has left three-quarters of the population of 6 million people in poverty.