IMF Warns Lebanon Still Facing Enormous Challenges

FILE - Protesters throw glass bottles at the Lebanese Central Bank building as they stand next to burning tires they set on fire in Beirut, Lebanon, Friday, March 24, 2023. (AP Photo/Hassan Ammar, File)
FILE - Protesters throw glass bottles at the Lebanese Central Bank building as they stand next to burning tires they set on fire in Beirut, Lebanon, Friday, March 24, 2023. (AP Photo/Hassan Ammar, File)
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IMF Warns Lebanon Still Facing Enormous Challenges

FILE - Protesters throw glass bottles at the Lebanese Central Bank building as they stand next to burning tires they set on fire in Beirut, Lebanon, Friday, March 24, 2023. (AP Photo/Hassan Ammar, File)
FILE - Protesters throw glass bottles at the Lebanese Central Bank building as they stand next to burning tires they set on fire in Beirut, Lebanon, Friday, March 24, 2023. (AP Photo/Hassan Ammar, File)

Four years after Lebanon’s historic meltdown began, the country is still facing “enormous economic challenges,” with a collapsed banking sector, eroding public services, deteriorating infrastructure and worsening poverty, the International Monetary Fund warned Friday.

In a statement issued at the end of a four-day visit by an IMF delegation to the crisis-hit country, the international agency welcomed recent policy decisions by the central bank to stop lending to the state and end the work in an exchange platform known as Sayrafa.

Sayrafa had helped control the spiraling black market that has controlled the Lebanese economy, but it has been depleting the country's foreign currency reserves.

The IMF said that despite the move, a permanent solution requires comprehensive policy decisions from parliament and the government to contain the external and fiscal deficits and start the restructuring of the banking sector and major state-owned companies.

In late August, interim central bank governor Wassim Mansouri called on Lebanon's ruling class to quickly implement economic and financial reforms, warning that the central bank won’t offer loans to the state and doesn't plan on printing money to cover the huge budget deficit to avoid worsening inflation.

Lebanon started talks with the IMF in 2020 to try reach an approved bailout, but since reaching a preliminary agreement with the IMF last year, the country's leaders have been reluctant to implement needed reforms.

“Lebanon has not undertaken the urgently needed reforms, and this will weigh on the economy for years to come,” the IMF statement said. It added that the lack of political will to “make difficult, yet critical, decisions” to launch reforms leaves Lebanon with an impaired banking sector, inadequate public services, deteriorating infrastructure and worsening poverty and unemployment conditions.

It said that although a seasonal uptick in tourism has increased foreign currency inflows over the summer months, receipts from tourism and remittances fall far short of what is needed to offset a large trade deficit and a lack of external financing.



Federal Reserve Cuts Key Rate by Sizable Half-point

News screens display the Federal Reserve rate announcement on the trading floor at The New York Stock Exchange (NYSE) in New York City, US, September 18, 2024. REUTERS/Andrew Kelly
News screens display the Federal Reserve rate announcement on the trading floor at The New York Stock Exchange (NYSE) in New York City, US, September 18, 2024. REUTERS/Andrew Kelly
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Federal Reserve Cuts Key Rate by Sizable Half-point

News screens display the Federal Reserve rate announcement on the trading floor at The New York Stock Exchange (NYSE) in New York City, US, September 18, 2024. REUTERS/Andrew Kelly
News screens display the Federal Reserve rate announcement on the trading floor at The New York Stock Exchange (NYSE) in New York City, US, September 18, 2024. REUTERS/Andrew Kelly

The Federal Reserve on Wednesday cut its benchmark interest rate by an unusually large half-point, a dramatic shift after more than two years of high rates helped tame inflation but that also made borrowing painfully expensive for American consumers.
The rate cut, the Fed’s first in more than four years, reflects its new focus on bolstering the job market, which has shown clear signs of slowing, The Associated Press reported. Coming just weeks before the presidential election, the Fed’s move also has the potential to scramble the economic landscape just as Americans prepare to vote.
The central bank’s action lowered its key rate to roughly 4.8%, down from a two-decade high of 5.3%, where it had stood for 14 months as it struggled to curb the worst inflation streak in four decades. Inflation has tumbled from a peak of 9.1% in mid-2022 to a three-year low of 2.5% in August, not far above the Fed’s 2% target.
The Fed’s policymakers also signaled that they expect to cut their key rate by an additional half-point in their final two meetings this year, in November and December. And they envision four more rate cuts in 2025 and two in 2026.
In a statement, the Fed came closer than it has before to declaring victory over inflation: It said it “has gained greater confidence that inflation is moving sustainably toward 2%.”
Though the central bank now believes inflation is largely defeated, many Americans remain upset with still-high prices for groceries, gas, rent and other necessities. Former President Donald Trump blames the Biden-Harris administration for sparking an inflationary surge. Vice President Kamala Harris, in turn, has charged that Trump’s promise to slap tariffs on all imports would raise prices for consumers even further.
Rate cuts by the Fed should, over time, lower borrowing costs for mortgages, auto loans and credit cards, boosting Americans’ finances and supporting more spending and growth. Homeowners will be able to refinance mortgages at lower rates, saving on monthly payments, and even shift credit card debt to lower-cost personal loans or home equity lines. Businesses may also borrow and invest more.
Average mortgage rates have already dropped to an 18-month low of 6.2%, according to Freddie Mac, spurring a jump in demand for refinancings.
The Fed’s next policy meeting is Nov. 6-7 — immediately after the presidential election.