BEIRUT (AP) — An economic recovery plan recently adopted by the Lebanese government is “an important step forward” to address Lebanon’s economic challenges, the International Monetary Fund’s chief said.
Kristalina Georgieva’s remarks come as tens of thousands of Lebanese have been thrown further into poverty and unemployment amid a lockdown because of coronavirus.
Georgieva added in her tweets late Monday that she had a productive call with Lebanese Prime Minister Hassan Diab, and that the IMF teams will start discussions in the near future with Lebanese officials on reforms in the tiny country.
The country’s severe economic and financial crisis — the worst since the end of the 1975-90 civil war — is rooted in decades of corruption and mismanagement. Financial woes deepened after nationwide protests against the political class erupted in October, after which banks imposed crippling, informal capital controls, limiting withdrawal and transfer of dollars. In March, the government defaulted on paying back its debt to local and international Eurobond holders for the first time in history.
Last week, Diab’s government presented a long-awaited five-year economic rescue plan based on which it would seek financial assistance from the IMF. The leader of Lebanon’s powerful Hezbollah threw his support behind Diab’s move, despite previous opposition to an IMF role. In a speech Monday, Hezbollah’s leader Sayyed Hassan Nasrallah warned, however, that the terms should be negotiated carefully.
In recent weeks, the local currency has crashed, losing more than half of its value after being pegged to the U.S. dollar since 1997. This in turn led to price hikes in consumer goods, triggering protests last week that left one protester dead and others wounded.
The Lebanese government is meeting Tuesday and was widely expected to extend the lockdown over coronavirus until May 24.
International donors have long demanded that Lebanon institute major economic reforms and anti-corruption measures, including in 2018, when they pledged 11 billion dollars. That money has yet to be released and there are hopes by Lebanese officials that an IMF program would help released the badly needed money.
Late last month, the government adopted a 53-page Financial Recovery Plan that said its economy is in a “free fall” and that an international financial rescue package is “urgently needed to backstop the recession and create the conditions for a rebound.”
The Lebanese plan vows to fight widespread corruption and to restructure of the massive debt that is one of the highest in the world. It also vows to reform infrastructure including waste management and state-run electricity company that has been one of the main burdens on state coffers over the past years.
“We agreed that our teams will soon start discussions on much needed reforms to restore sustainability and growth for the benefit of the Lebanese people,” Georgieva tweeted.