Lebanon aims for long-delayed IMF reforms in October

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BEIRUT (UKTN) – Crisis-stricken Lebanon hopes to implement major reforms before the end of next month demanded by the International Monetary Fund for a long-delayed but urgently needed bailout, if there is “political will,” the government said. Lebanon’s outgoing economy minister Tuesday.

Amin Salam spoke to The UK Time News after meeting an IMF delegation that has been visiting Lebanese officials since Monday. The reforms include a restructuring of the country’s banking system and banking secrecy laws.

The small Mediterranean country is gripped by a three-year severe economic crisis that has left three quarters of the population in poverty after the Lebanese pound lost more than 90% of its value.

Talks between the government of Lebanon and the IMF began in May 2020 and reached a staff-level agreement earlier this year in April.

The Lebanese government has implemented some of the IMF’s demands from the agreement, which lists five “key pillars” that must be implemented before a bailout program is completed. These include the restructuring of Lebanon’s ailing financial sector, the implementation of fiscal reforms, the proposed restructuring of public external debt and the introduction of strong anti-corruption and money-laundering measures.

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“The IMF is still very committed to helping the Lebanese government move forward with the agenda for previous actions,” Salam said, adding that since the personnel-level agreement was reached, Lebanon has held parliamentary elections while work is underway on the formation of a new cabinet and President Michel Aoun’s six-year term ends on October 31.

Since the economic collapse began with nationwide protests in October 2019 against the ruling class that has ruled the country since the end of the 1975-90 civil war, little has been done to help Lebanon out of the worst economic crisis in its modern history. The political class, responsible for the decades of corruption and mismanagement that led to the crisis, has resisted reforms demanded by the international community.

Lebanon’s GDP has fallen sharply in recent years from about $55 billion in 2018 to $20.5 billion in 2021. Tens of thousands have lost their jobs since 2019, as the crisis was exacerbated by the coronavirus and a massive explosion at the port of Lebanon. Beirut in August 2020, causing more than 200 deaths, thousands of injuries and damage worth billions of dollars. Everyday life has become a struggle with rampant power cuts and some of the worst food inflation rates in the world.

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“We hope October will be the magical month,” Salam said. He added that the planned actions include a law on capital controls, a law on banking secrecy, a law on banking restructuring and approving the state budget for 2022.

Salam said the four bills have been extensively studied and reviewed by parliament and the government, with the exception of bank restructuring laws that are still in the works.

“The other three laws require serious political will, a serious political commitment between the executive and the legislature,” Salam said in English, adding that “I honestly really believe we can finalize those in October if the political will is there.”

“We believe that if those four previous actions are implemented quickly, we will be much, much closer this year to a final (rescue) deal,” Salam added, referring to a possible full-scale bailout deal with the IMF, which will leave Lebanon about would bring in $4 billion and unlock billions more from international governments and institutions. The governor of Lebanon’s central bank estimated that the country needs at least $12 billion to boost its economy.

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Salam also said talks with the IMF were partly aimed at unifying the value of the Lebanese pound against the US dollar, as Lebanon currently has at least five exchange rates for the pound.

Also on Tuesday came a warning from the European Union’s ambassador to Lebanon, Ralph Tarraf, who tweeted after meeting Aoun that he urged the president to “do his utmost to implement the crucial economic, monetary and fiscal reforms that Lebanon has pledged.” Tarraf met Aoun along with other ambassadors, including the envoys from Switzerland and Norway.

“The time to act is now,” Tarraf tweeted after the meeting, calling on Lebanon to implement the reforms requested by the IMF.

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