IMF: Lebanon is in 'Very Dangerous Situation'

Ernesto Rigo, the head of an International Monetary Fund mission to Lebanon, speaks during a press conference in Beirut, Lebanon, Thursday, March 23, 2023. AP
Ernesto Rigo, the head of an International Monetary Fund mission to Lebanon, speaks during a press conference in Beirut, Lebanon, Thursday, March 23, 2023. AP
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IMF: Lebanon is in 'Very Dangerous Situation'

Ernesto Rigo, the head of an International Monetary Fund mission to Lebanon, speaks during a press conference in Beirut, Lebanon, Thursday, March 23, 2023. AP
Ernesto Rigo, the head of an International Monetary Fund mission to Lebanon, speaks during a press conference in Beirut, Lebanon, Thursday, March 23, 2023. AP

The International Monetary Fund warned on Thursday that Lebanon was in a very dangerous situation a year after it committed to reforms it has failed to implement and said the government must stop borrowing from the central bank.

IMF mission chief Ernesto Rigo told a news conference in Beirut that the authorities should accelerate the implementation of conditions set for a $3 billion bailout.

"One would have expected more in terms of implementation and approval of legislation" related to reforms, he said, noting "very slow" progress. "Lebanon is in a very dangerous situation," he added, in unusually frank remarks.

Lebanon signed a staff-level agreement with the IMF nearly one year ago but has not met the conditions to secure a full program, which is seen as crucial for its recovery from one of the world's worst financial crises.

Without implementing rapid reforms, Lebanon "will be mired in a never-ending crisis," the IMF warned in a written statement after Rigo's remarks.

The economy has been crippled by the collapse of the Lebanese currency, which has lost some 98% of its value against the US dollar since 2019, triggering triple-digit inflation, spreading poverty and a wave of emigration.

The crisis erupted after decades of profligate spending and corruption among the ruling elites, some of whom led banks that lent heavily to the state.

The government estimates losses in the financial system total more than $70 billion, the majority of which were accrued at the central bank.

"No more borrowing from the central bank," Reuters quoted Rigo as saying. "Over the years, the government has been borrowing from the central bank. Not just in the past (but also) the last few months, which is something we have recommended should stop."

The IMF has called for financial sector losses to be distributed in a way that preserves the rights of small depositors and limits recourse to state assets, though powerful politicians and banks have pushed back, delaying the recovery.

"Suffice it to say that the loss is so large that there will unfortunately have to be a distribution between the government, the banks and depositors," Rigo added.

Still, he said that the IMF would "never walk away" from helping a member country and there was no deadline for Lebanon to implement the reforms.



Oil Prices Steady as Markets Weigh Demand against US Inventories

FILE - Pump jacks extract oil from beneath the ground in North Dakota, May 19, 2021. (AP Photo/Matthew Brown, File)
FILE - Pump jacks extract oil from beneath the ground in North Dakota, May 19, 2021. (AP Photo/Matthew Brown, File)
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Oil Prices Steady as Markets Weigh Demand against US Inventories

FILE - Pump jacks extract oil from beneath the ground in North Dakota, May 19, 2021. (AP Photo/Matthew Brown, File)
FILE - Pump jacks extract oil from beneath the ground in North Dakota, May 19, 2021. (AP Photo/Matthew Brown, File)

Oil prices were little changed on Thursday as investors weighed firm winter fuel demand expectations against large US fuel inventories and macroeconomic concerns.

Brent crude futures were down 3 cents at $76.13 a barrel by 1003 GMT. US West Texas Intermediate crude futures dipped 10 cents to $73.22.

Both benchmarks fell more than 1% on Wednesday as a stronger dollar and a bigger than expected rise in US fuel stockpiles pressured prices.

"The oil market is still grappling with opposite forces - seasonal demand to support the bulls and macro data that supports a stronger US dollar in the medium term ... that can put a ceiling to prevent the bulls from advancing further," said OANDA senior market analyst Kelvin Wong.

JPMorgan analysts expect oil demand for January to expand by 1.4 million barrels per day (bpd) year on year to 101.4 million bpd, primarily driven by increased use of heating fuels in the Northern Hemisphere.

"Global oil demand is expected to remain strong throughout January, fuelled by colder than normal winter conditions that are boosting heating fuel consumption, as well as an earlier onset of travel activities in China for the Lunar New Year holidays," the analysts said.

The market structure in Brent futures is also indicating that traders are becoming more concerned about supply tightening at the same time demand is increasing.

The premium of the front-month Brent contract over the six-month contract reached its widest since August on Wednesday. A widening of this backwardation, when futures for prompt delivery are higher than for later delivery, typically indicates that supply is declining or demand is increasing.

Nevertheless, official Energy Information Administration (EIA) data showed rising gasoline and distillates stockpiles in the United States last week.

The dollar strengthened further on Thursday, underpinned by rising Treasury yields ahead of US President-elect Donald Trump's entrance into the White House on Jan. 20.

Looking ahead, WTI crude oil is expected to oscillate within a range of $67.55 to $77.95 into February as the market awaits more clarity on Trump's administration policies and fresh fiscal stimulus measures out of China, OANDA's Wong said.