IMF Wraps Up Lebanon Visit, Urges Deeper Reforms to Secure a Deal

An IMF mission, which visited Lebanon from September 22 to 25, concluded without a final agreement on a program, despite acknowledging progress on key reforms. Finance Minister Yassine Jaber attributed the delay to the ongoing finalization of the financial gap law and the need for further revisions to the banking restructuring legislation.

The IMF’s ongoing engagement will continue, with the next major discussion expected at the October 2025 Annual Meetings.

Areas Requiring Deeper Reforms

The IMF’s concluding statement stressed the need for deeper and more ambitious efforts in several critical areas to secure a deal and unlock sustainable growth:

• Banking Sector: The IMF urged revisions to the restructuring plan to ensure it aligns with global standards, protects small depositors, and supports the country’s overall debt sustainability. The completion of the Financial Gap Law is a necessary immediate next step.
• 2026 Budget: Recommendations focused on implementing broader tax reforms, ensuring transparent expenditure reporting, and aligning spending with available financing to prioritize reconstruction and social protection; in addition to disagreement on repealing the excise fuel tax.
• Fiscal Framework: A medium-term strategy is required to restore long-term fiscal and debt sustainability.
• Growth Outlook: Achieving sustainable growth hinges on ambitious structural reforms to unlock Lebanon’s potential and attract international reconstruction support.

Progress Acknowledged by the IMF

The IMF recognized Lebanon’s economic resilience, particularly supported by strong diaspora tourism, as well as several recent governmental reform steps:

• Fiscal and Monetary Discipline: Authorities maintained tight fiscal and monetary discipline, achieving a small fiscal surplus and boosting international reserves.
• Banking Sector: Progress includes approval of the Bank Restructuring Law.
• Institutional and Statistical Capacity: Regulatory bodies for the electricity and telecom sectors have been formally established, and efforts are underway to rebuild fiscal-level data systems and digitize tax compliance processes to improve transparency and efficiency.

Central Bank Debt Dispute and Government Pledge

The dispute over the $16.5 billion state debt to the Central Bank (BDL) remains a central point of discussion. Minister Jaber affirmed the government’s willingness to support BDL, but noted its limited capacity to absorb the liability directly.

Jaber insisted that the State is restricted from borrowing without a law issued by Parliament, linking his position to a conditional readiness to assist in the BDL’s recapitalization (the mechanism for which is yet to be announced).

In a commitment to move the process forward, Jaber pledged to prepare a law on the resolution of banks, which will govern the distribution of losses in a hierarchy beginning with the banks and ending with the depositors, in time for the next IMF meeting, though this remains a major stumbling block especially on the part of banks.

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