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Lebanon to request ‘technical assistance’ from the IMF to resolve economic crisis

February 12, 2020 at 2:36 pm

The Central Bank of Lebanon [Karan Jain/Flickr]

The Lebanese government will request “technical assistance” from the IMF to draw up a stabilisation plan to resolve the country’s financial and economic crisis, including plans to restructure public debt, a government source told Reuters today.

Parliament Speaker Nabih Berri previously suggested yesterday that a decision on whether to pay a $1.2 billion Eurobond, which is maturing on 9 March, should be based on IMF advice.

It was confirmed today that “Lebanon is… seeking advice from the IMF on whether to pay the Eurobond maturity amid concerns that any reprofiling of Lebanon’s debt should be conducted in an orderly way to avoid damaging the country’s banking system”, the government source added.

Nevertheless, Lebanon’s banking association said that it is imperative to meet payment commitments of the Eurobond on time in order to protect depositors and preserve the country’s place in international financial markets.

The association added that debt restructuring would require time and help from international institutions because the time remaining before the maturity on 9 March is too short for “competent handling” and preparation.

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The Daily Star newspaper reported that “there has been contact [between the government and] the IMF but Lebanon will send an official request in the coming hours to have a team dedicated to dealing with technical assistance.”

Despite calling for help from the IMF, Berri stressed that Lebanon cannot “surrender” to inevitable stipulations from the fund because of the country’s “incapacity to bear its conditions”.

Speculation has suggested that the IMF would impose a reduction in government spending, increasing VAT and fuel excises, and advocate privatisation of public assets.

Lebanon is currently in the midst of its worst economic and financial crisis since the end of the civil war in 1990. The new Lebanese government is facing soaring inflation, and a local currency which has lost much of its value in recent months. Banks have imposed informal capital controls, but these measures have failed to stem the flight of capital from the country.

The small country has one of the highest debt to GDP ratios in the world, at 151 per cent, according to Bloomberg.