IMF Says Lebanon Needs More Work on Bank Restructuring Before a New Programme

The statement came at the end of an IMF staff visit to Beirut this week. The fund said there had been progress in clarifying the approaches under consideration by the central bank, the Banque du Liban, and the government. "However, further work is needed to reach an agreement on a strategy for an effective and durable restructuring of Lebanon's banking sector, leading to a sound and resilient system," said Ernesto Ramirez Rigo, the IMF's mission chief for Lebanon.

The main obstacle is still the question of who bears the losses from Lebanon's financial collapse. The IMF said that implementing the Bank Resolution Law and the Financial Stabilisation and Deposits Recovery Law, known as the financial gap law, was "essential to restore financial stability and maximise deposits recovery" once both are in force. The fund said the deposits law must uphold "the hierarchy of claims in the allocation of losses, thereby maximising protection for depositors". It also said deposit repayments must be consistent with the liquidity of the central bank and the banks, with public debt sustainability, and with restoring the central bank's solvency.

Both laws are stuck. Parliament passed a bank resolution law in August, but President Joseph Aoun referred it to the Constitutional Council over an amendment affecting the central bank's independence and powers. The cabinet sent the financial gap law to parliament in 2025, but banks and political parties dispute it and it has not been put to a vote.

Lebanon reached a staff-level agreement with the IMF in April 2022, but the government of the time was slow to carry out the fund's recommendations. The country first defaulted on its debt in March 2020, leading to hyperinflation, high unemployment, a sharp rise in poverty and depositors being cut off from their savings. Official estimates since 2022 have put losses from the collapse at about $70 billion, a figure now expected to be higher. The World Bank has ranked the crisis among the worst anywhere since 1850.

Finance Minister Yassin Jaber told a news conference he hoped to make enough progress to agree a programme with the IMF and sign it in the first quarter of next year, "and by its end at the latest". The fund said it expects to continue talks with the authorities in the coming weeks.