- 08
- Apr.
- 2024
Critical Weeks for Lebanon's IMF Agreement
modified on 11 Apr. 2024 à 17:20 Read : 5 minute(s) A A A
The European Union's stance is in line with that of the International Monetary Fund (IMF) regarding recent indications and developments in Lebanon, including the passage of the 2024 budget within constitutional deadlines, reforms to banking secrecy laws and stabilization of the exchange rate in the parallel market. These developments signal that viable solutions in Lebanon are achievable with political determination. Both parties reaffirm that reaching a final agreement between Lebanon and the IMF, despite internal divisions and divergent opinions, is pivotal for initiating a new phase of reform. This sets the stage for Lebanon to access external support from various international and Arab institutions, as well as donor countries, and re-establishes Lebanon’s trajectory towards recovery while restoring its international credibility.
The EU delegation and the IMF’s positions are crucial at this juncture, as the divide deepens between those advocating for an IMF agreement and those arguing that Lebanon has outgrown it. This agreement no longer serves Lebanon’s interests, notably since most of its terms, valued at no more than $3 billion, stem from crisis-driven actions, such as exchange rate liberalization, and the abrupt cessation of subsidies, among others.
At present, those refusing to sign an agreement with the IMF argue that a lack of political commitment undermines the implementation of essential reforms pledged therein. Consequently, what value does a mere paper agreement hold if its contents cannot be effectively implemented? These circles pose a crucial question: Can a government, by signing an agreement with the IMF, truly curb smuggling across its Syrian borders and successfully address the issue of tax evasion in an economy transitioning towards a “cash-based” model?
And can the government, which has so far been unable to implement the provisions outlined by the Parliament in the Salary Scale Law No. 44 of 2017, particularly concerning the cessation of all forms of public sector employment and the imperative of its restructuring, and despite recommitting to this reform in the 2018 budget law, be trusted to initiate the necessary restructuring of the public sector?
Regardless, Lebanon still benefits from the IMF’s technical support. However, reaching a definitive agreement with the IMF remains subject to political developments. This hinges on the election of a new president and a fully empowered government capable of reshaping a new negotiating team that advocates for Lebanon’s very interests during negotiations, over merely satisfying the International Monetary Fund and its interests. Any agreement, even if deemed necessary, should prioritize Lebanon's interests over personal gain, ensuring that it does not come at the expense of the country.
Furthermore, visits by officials from the IMF to Beirut continued unabated. The latest was the visit of the IMF's Executive Director, Mahmoud Mohieddin, who participated in the signing of the international agreement with the IMF two years ago during two separate meetings. These meetings were held by Mohieddin with Speaker of Parliament Nabih Berri and caretaker Prime Minister Najib Mikati.
According to relevant information, discussions focused on deposit-related matters, and Berri underscored the importance of safeguarding depositors' rights to restore confidence in Lebanon and its banking sector. Additionally, Mohieddin reiterated the IMF's commitment to the agreement signed with Lebanon, dispelling any notions of its cancellation. Attendees also discussed the ongoing preparations for an upcoming visit by a Lebanese delegation, led by Deputy Prime Minister Saadeh Al-Shami, to Washington later this month for the IMF spring meetings and the World Bank.
IMF officials held numerous coordination meetings with the Lebanese government and met, to this end, with many financial and banking authorities in an attempt to prompt necessary amendments to Lebanese laws and regulations. Despite receiving satisfactory promises and reassurances, they continue to question the fate and timing of these changes. According to sources monitoring these meetings, IMF officials complained about Lebanon’s failure to fulfill past commitments in terms of many promises made during negotiations, none of which have materialized so far. Of particular concern were laws regarding capital controls, bank restructuring and, notably, the comprehensive financial reform plan.
As attention turns to the spring meetings held by the International Monetary Fund and the World Bank in Washington, later this month, Lebanon's dossier will be on the discussion table. The Lebanese delegation attending these meetings may face harsh words due to Lebanon's failure to fulfill its reform commitments, transforming it into a non-cooperative country.
The likelihood of reaching a final agreement with the IMF remains low, contingent upon Lebanon's actions. IMF officials are cognizant of Lebanon's state of war since October 7; they understand that Lebanon deserves a reasonable timeframe, but not an overly prolonged one. Lebanese authorities have had two years to fulfill their commitments.
There's a unanimous consensus that the financial assistance Lebanon will receive from the IMF, delivered gradually and in installments, will cover only a fraction of its considerable economic shortfall. Yet, the essence of the agreement lies in Lebanon's commitment to the international community, proving its ability to sustain and borrow through essential reforms. The IMF and its officials stress the vital importance of structural reforms to prevent Lebanon from being ensnared in an endless cycle of plights. Effective leadership is paramount, and responses to Lebanon's economic crisis must only emanate from within.
The EU delegation and the IMF’s positions are crucial at this juncture, as the divide deepens between those advocating for an IMF agreement and those arguing that Lebanon has outgrown it. This agreement no longer serves Lebanon’s interests, notably since most of its terms, valued at no more than $3 billion, stem from crisis-driven actions, such as exchange rate liberalization, and the abrupt cessation of subsidies, among others.
At present, those refusing to sign an agreement with the IMF argue that a lack of political commitment undermines the implementation of essential reforms pledged therein. Consequently, what value does a mere paper agreement hold if its contents cannot be effectively implemented? These circles pose a crucial question: Can a government, by signing an agreement with the IMF, truly curb smuggling across its Syrian borders and successfully address the issue of tax evasion in an economy transitioning towards a “cash-based” model?
And can the government, which has so far been unable to implement the provisions outlined by the Parliament in the Salary Scale Law No. 44 of 2017, particularly concerning the cessation of all forms of public sector employment and the imperative of its restructuring, and despite recommitting to this reform in the 2018 budget law, be trusted to initiate the necessary restructuring of the public sector?
Regardless, Lebanon still benefits from the IMF’s technical support. However, reaching a definitive agreement with the IMF remains subject to political developments. This hinges on the election of a new president and a fully empowered government capable of reshaping a new negotiating team that advocates for Lebanon’s very interests during negotiations, over merely satisfying the International Monetary Fund and its interests. Any agreement, even if deemed necessary, should prioritize Lebanon's interests over personal gain, ensuring that it does not come at the expense of the country.
Furthermore, visits by officials from the IMF to Beirut continued unabated. The latest was the visit of the IMF's Executive Director, Mahmoud Mohieddin, who participated in the signing of the international agreement with the IMF two years ago during two separate meetings. These meetings were held by Mohieddin with Speaker of Parliament Nabih Berri and caretaker Prime Minister Najib Mikati.
According to relevant information, discussions focused on deposit-related matters, and Berri underscored the importance of safeguarding depositors' rights to restore confidence in Lebanon and its banking sector. Additionally, Mohieddin reiterated the IMF's commitment to the agreement signed with Lebanon, dispelling any notions of its cancellation. Attendees also discussed the ongoing preparations for an upcoming visit by a Lebanese delegation, led by Deputy Prime Minister Saadeh Al-Shami, to Washington later this month for the IMF spring meetings and the World Bank.
IMF officials held numerous coordination meetings with the Lebanese government and met, to this end, with many financial and banking authorities in an attempt to prompt necessary amendments to Lebanese laws and regulations. Despite receiving satisfactory promises and reassurances, they continue to question the fate and timing of these changes. According to sources monitoring these meetings, IMF officials complained about Lebanon’s failure to fulfill past commitments in terms of many promises made during negotiations, none of which have materialized so far. Of particular concern were laws regarding capital controls, bank restructuring and, notably, the comprehensive financial reform plan.
As attention turns to the spring meetings held by the International Monetary Fund and the World Bank in Washington, later this month, Lebanon's dossier will be on the discussion table. The Lebanese delegation attending these meetings may face harsh words due to Lebanon's failure to fulfill its reform commitments, transforming it into a non-cooperative country.
The likelihood of reaching a final agreement with the IMF remains low, contingent upon Lebanon's actions. IMF officials are cognizant of Lebanon's state of war since October 7; they understand that Lebanon deserves a reasonable timeframe, but not an overly prolonged one. Lebanese authorities have had two years to fulfill their commitments.
There's a unanimous consensus that the financial assistance Lebanon will receive from the IMF, delivered gradually and in installments, will cover only a fraction of its considerable economic shortfall. Yet, the essence of the agreement lies in Lebanon's commitment to the international community, proving its ability to sustain and borrow through essential reforms. The IMF and its officials stress the vital importance of structural reforms to prevent Lebanon from being ensnared in an endless cycle of plights. Effective leadership is paramount, and responses to Lebanon's economic crisis must only emanate from within.
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