The Executive Board of the International Monetary Fund (IMF) issued a report on Thursday summarizing the findings of a staff team that recently visited Lebanon and held discussions with Lebanese officials on the state of the economy and economic policies.
According to the IMF, the economy has contracted by about 40%, the Lebanese lira has lost 98% of its value, inflation has been in triple digits, and the central bank has lost two-thirds of its foreign exchange reserves since the onset of the crisis in 2019.
Although the economy showed some signs of stabilization in 2022, it remains severely depressed. Still, high uncertainty, banking sector restrictions, and an expensive and very limited electricity supply continue to hinder economic activity.
The fiscal deficit is estimated to have widened to 5% of GDP in 2022 due to collapsing revenues. The current account deficit is estimated to have widened to almost 30% of GDP on account of surging imports, while foreign domestic investment has remained depressed, as have other financial inflows.
“The economic outlook is highly uncertain and depends on the authorities’ policy actions. Decisive implementation of a comprehensive economic recovery plan could steadily reduce imbalances and provide a policy anchor that will help restore confidence and facilitate the return to growth. However, the continuation of the status quo presents the largest risk to the outlook,” the report said.
The IMF’s Executive Directors expressed regret that very limited policy action has been taken to address the crisis. They highlighted the risks and surging costs of further delays and urged decisive implementation of a comprehensive reform plan to resolve the crisis and bring about a sustainable recovery.
They underscored the critical role that donor support could play in stabilizing and reviving the economy once reforms start to be implemented, stressing that credible restructuring of the financial system is the key to restoring its health and viability. 
They also called for upfront actions to address the exceptionally large losses and stressed the importance of protecting small depositors to the extent possible.
