Lebanon and the International Monetary Fund have reached a staff-level agreement on an economic reform plan for the crisis-hit country that could potentially unlock around $3bn of funding over several years.
The agreement comes as an IMF delegation wrapped up an 11-day visit to Lebanon on Thursday.
An agreement with the IMF is seen as vital for Lebanon to begin exiting a crippling economic and financial meltdown that marks its most destabilising crisis since the 1975-90 civil war.
The extended fund arrangement would run over 46 months and Lebanon had requested access to the equivalent of around $3 billion, the IMF said in a statement.
Lebanese authorities had agreed, prior to the IMF board considering whether to approve the deal, to complete eight reform measures.
Beirut is required to enact reforms that include steps its ruling politicians have failed to deliver since the crisis erupted, such as addressing how to allocate losses from a government-estimated $70 billion hole in the financial system.
It is a first step on the way to an IMF bailout to Lebanon, potentially unlocking billions of dollars in loans.
The IMF said there are “five key pillars” that should be implemented, including restructuring the financial sector and implementing fiscal reforms, along with the proposed restructuring of external public debt. They also include reforming state-owned enterprises, particularly in the electricity sector, and strengthening governance, anti-corruption, and anti-money laundering efforts.
The IMF also called for establishing a credible and transparent monetary and exchange rate system as there are several exchange rates for the Lebanese pound. It said that there should be parliament approval of a reformed bank secrecy law to bring it in line with international standards to fight corruption.
Lebanon defaulted in March 2020 on paying back its massive debt, worth at the time some $90 billion or 170% of GDP, making it one of the highest in the world.
Lebanon’s economic crisis that began in October 2019, rooted in decades of corruption and mismanagement, has left three-quarters of the population of 6 million people, including 1 million Syrian refugees, in poverty. The Lebanese pound has lost more than 90% of its value.
Alongside its financial meltdown, Lebanon has faced political paralysis and a diplomatic crisis in ties with Gulf Arab states - formerly major donors to Lebanon - over their opposition to Iran-backed Hezbollah's influence in Beirut.
A number of Gulf states recalled their ambassadors to Beirut last year, but in a sign of a possible thaw in ties, Saudi Arabia and Kuwait Thursday evening announced their ambassadors would return.
Talks between Lebanon and the IMF began in May 2020, then stopped for months amid a political deadlock in the country. They resumed after Mikati took office last September but no breakthrough had been made until Thursday’s agreement was reached.
(with inputs from agencies)
