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IMF warns: Without reform, Lebanon may enter an ‘endless crisis’

March 23, 2023 at 2:52 pm

Citizens in Beirut block the roads to traffic to react to the increase in the cost of living and fuel prices as the Lebanese Lira lost 99% of its value in the last three years and falls to new record low against US Dollar [Hussam Shbaro / Anadolu Agency]

The International Monetary Fund (IMF) warned, Thursday, that Lebanon is passing through a “very dangerous” stage amid deepening economic collapse, warning that failure to implement urgent reforms would plunge the country into an “endless crisis”.

Ernesto Ramirez Rigo, the head of the IMF mission visiting Lebanon, said at a news conference, Thursday, that continued inaction by Lebanese leaders would leave the nation in a “never-ending crisis” in which it could spiral into hyperinflation, “affecting the quality of life of many Lebanese for years to come”.

In April, the IMF announced reaching a preliminary agreement with Lebanon on a $3 billion bailout package over four years. However, it linked the bailout package to the government’s commitment to implementing prior reforms, and the Parliament’s approval of urgent draft laws, most notably the “Capital Control” law that restricts withdrawals and transfers of foreign currencies from banks, in addition to the approval of legislation related to restructuring the banking sector and amending the banking secrecy law.

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Regarding the implementation of the required reforms, Rigo indicated that Lebanon has made progress, but “unfortunately the progress is very slow, given the complexity of the situation”.  “One would have expected a lot more in terms of implementation,” he added.

On Tuesday, the Lebanese lira (pound) recorded a historic collapse, with the exchange rate exceeding 140,000 against the US dollar.

Since last October, the Lebanese Parliament has failed 11 times to elect a president due to deep political divisions. Political paralysis exacerbates the crisis, with the caretaker government unable to take necessary decisions, including the reforms required by the international community and the IMF to provide support in order to stop the bleeding.

For his part, the head of the caretaker government in Lebanon, Najib Mikati, said, “the situation requires a quick emergency operation to save the country”, stressing that the solution is to elect a president for the republic.

Speaking at a press conference after meeting with Parliament Speaker, Nabih Berri, Mikati explained that the Parliament bureau meeting has been postponed to refer some laws to parliamentary committees for review, so that the next parliamentary session will be more productive in terms of approving laws.

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