IMF technical team to start Lebanon talks on Thursday

A team of IMF experts will begin consultations with the Lebanese government in Beirut on Thursday, a source familiar with the matter said to Reuters, as the heavily indebted state seeks the Fund’s help in addressing a major financial crisis.

Lebanon formally requested IMF technical assistance last week. The IMF has said Lebanon is seeking advice to help with reforms to restore stability and growth and has not asked for any financial assistance.

The source gave no further details on the IMF visit.

The financial crisis, worse than any Lebanon endured in its 1975-90 civil war, came to a head last year as slowing capital inflows led to a liquidity crunch and demonstrations erupted against the ruling elite.

Banks are imposing controls on access to cash and blocking transfers abroad, the Lebanese pound has slumped, prices are rising and firms are shedding jobs or slashing wages.

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

Lebanon must urgently decide on how to deal with fast-approaching debt payments, including a $1.2 billion Eurobond due on March 9. Lebanon’s public debt is equivalent to around 150% of its GDP.

Speaking in Dubai on Sunday, IMF Managing Director Kristalina Georgieva said Lebanon needed urgent and deep structural reforms. The IMF was sending a small technical team to “give a diagnostic recommendation on measures to take” though it was up to Lebanon to take decisions, she said.

Even as it seeks IMF technical help, comments attributed to Parliament Speaker Nabih Berri last week indicated Lebanon’s opposition to a full IMF programme. He said Lebanese would not be able to bear IMF conditions.

The World Bank, which was already projecting a small recession in 2019, estimates that it will now be deeper.

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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.