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.