Lebanon, IMF Start Discussions to Revive Economy

Published May 14th, 2020 - 11:30 GMT
Lebanon, IMF Start Discussions to Revive Economy
Cash-strapped banks have largely frozen depositors out of their savings for months as dollars have grown ever more scarce. (Shutterstock)
Highlights
Beirut officially asked for IMF assistance earlier this month in what Prime Minister Hassan Diab called a "historic moment.”

Lebanon began talks with the International Monetary Fund on Wednesday, aiming to secure some $10 billion of badly needed aid to help the country out of the financial crisis.

"We are comfortable with the atmosphere of these initial discussions, and we expect that the upcoming discussions will be equally constructive," Finance Minister Ghazi Wazni said in a statement.

Tough negotiations lie ahead for Lebanon, which will be expected to enact economic reforms its sectarian leaders have long avoided if Beirut hopes to secure international aid, analysts say.

With Lebanon in a coronavirus lockdown, the first round of talks began via videoconferencing.

Beirut officially asked for IMF assistance earlier this month in what Prime Minister Hassan Diab called a "historic moment.”

The talks will be based on a government rescue plan which maps out tens of billions of losses in the financial system.

An international support group including the United States and France said in a statement the decision to request an IMF program was "a first step in the right direction".

Domestic political support was "necessary for successful conduct and rapid completion of negotiations with the IMF", the support group noted, hinting at the need for consensus among Lebanon's rival politicians.

Foreign donors, which have helped Lebanon in the past, say they will not think about giving any fresh aid before the state enacts reforms to address rampant state corruption and waste.

Cash-strapped banks have largely frozen depositors out of their savings for months as dollars have grown ever more scarce.

After defaulting on its sovereign debts in March, Lebanon hopes an IMF program will help in talks with its creditors.

Some economists see the plan as a good first step but remain skeptical about Lebanon's ability to enact reforms to cut public sector spending and overhaul the banking sector after years of dragging its feet and political wrangling.

The plan has also faced strong pushback from banks which are projected to sustain losses of some $83 billion. The banks, a major lender to government for decades, are working on their own plan that seeks to keep some of its capital.


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