September 24, 2022

BEIRUT (AP) – The International Monetary Fund said Wednesday that the Lebanese government’s slowness to implement desperately needed reforms is exacerbating the country’s economic meltdown, even as officials met to discuss urgent and long-delayed aid.

The IMF announcement followed a three-day visit by fund representatives to Beirut to discuss with Lebanese officials the implementation of reforms made as part of a staff-level agreement between the two sides in April.

“Despite the urgency for action to address Lebanon’s deep economic and social crisis, progress in implementing reforms agreed under the April SLA remains very slow,” the IMF said.

The Lebanese government has implemented several of the IMF’s demands from the agreement, which lists five “key pillars” to be implemented before finalizing the bailout program. These include restructuring Lebanon’s ailing financial sector, implementing fiscal reforms, restructuring external public debt and introducing strong anti-corruption and anti-money laundering measures.

Lebanon’s economy has been in free fall since late 2019 in an economic meltdown that the World Bank describes as one of the worst the world has witnessed since the 1850s. The crisis is rooted in decades of corruption and mismanagement by the political class that has ruled the tiny nation since the end of the 1975-90 civil war.

“Lebanese economy remains in severe depression due to continued stalling of much-needed economic reforms and high uncertainty,” IMF team chief Ernesto Ramirez Rigo said.

The IMF said Lebanon’s GDP has shrunk by more than 40 percent since 2018, inflation remains in triple digits, foreign reserves are dwindling, and the parallel exchange rate hit new lows this week, reaching over 38,000 Lebanese pounds to the dollar.

“Amid the collapse of revenues and drastically reduced spending, public sector institutions are collapsing and basic services to the population have been drastically reduced,” said Ramirez Rigo. “Unemployment and poverty are at historically high rates.”

The visit came a week after angry depositors raided at least seven bank branches to access their trapped savings after local lenders imposed informal capital controls since the economic crisis began.

The IMF statement states that large losses in the banking sector “should be recognized and addressed in advance, respecting the hierarchy of claims.” Small depositors must be fully protected.”

The Association of Banks in Lebanon said on Wednesday that bank branches will not open as planned on Thursday, but will remain closed “due to the dangers to which employees and customers may be exposed”. It said banks will remain closed until they receive assurances from government and security agencies.

Earlier on Wednesday, judicial authorities ordered the release on bail of two men involved in a bank robbery last week. The two men were banned from leaving the country for six months.

On Tuesday, Lebanon’s interim economy minister, Amin Salam, said Lebanon hoped to pass key reforms demanded by the IMF for long-delayed but urgently needed aid before the end of October, if there is “political will”.

Salam added that adopting the reforms will provide Lebanon with about $4 billion and free up billions more from international governments and institutions. The governor of Lebanon’s central bank has estimated that the country needs at least $12 billion to jumpstart its economy.

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