Can Lebanon turn an IMF diagnosis into reform?

Seven years after Lebanon's financial collapse began in 2019, the country has received one of the most comprehensive assessments yet of the governance failures that contributed to the crisis. The newly released International Monetary Fund governance diagnostic examines pervasive corruption vulnerabilities spanning public finances, financial oversight, the central bank, anti-money laundering systems, and the judiciary, identifying shortcomings that continue to impede economic recovery and weaken public institutions.

The report arrives at a consequential moment. Following the election of President Joseph Aoun and the formation of Prime Minister Nawaf Salam's government in early 2025, Lebanese officials have pledged to pursue reforms aimed at restoring confidence, strengthening state institutions, and re-engaging with international partners. In response to the report, the Ministry of Finance welcomed its findings and reaffirmed its commitment to the reform process, describing the diagnostic as an opportunity to advance transparency, accountability, and institutional reform.

Conducted at the request of Lebanese authorities, the IMF assessment concludes that corruption vulnerabilities remain widespread across key state functions and continue to undermine economic recovery. Yet the report is not merely a catalogue of problems. It also provides a detailed roadmap for addressing them. The question now is whether Lebanon can translate years of recommendations into meaningful action.

A comprehensive assessment of governance weaknesses

At its core, the report argues that weak institutions, fragmented oversight, and inadequate accountability have allowed corruption vulnerabilities to persist across much of the Lebanese state.

Among the report's central concerns are weaknesses in public financial management. The IMF found that budget formulation and execution remain vulnerable to inadequate oversight, recurrent violations of budget procedures, and substantial off-budget spending. While the adoption of a new public procurement law represented an important step forward, implementation has been uneven, with delays in establishing key oversight bodies responsible for monitoring public contracts and handling complaints.

The report also identifies significant governance shortcomings within state-owned enterprises, customs and tax administration, financial supervision, and Banque du Liban. According to the IMF, governance arrangements at the central bank have historically fallen short of international standards, creating opportunities for opaque decision-making and concentrated authority.

Why electricity remains the ultimate test

Although the IMF's recommendations span multiple sectors, Nassib Ghobril, chief economist at Byblos Bank, argues that the most important test of Lebanon's commitment to reform lies in an area that receives comparatively little attention in the report itself: electricity.

"The start has to be in the electricity sector," he told The Beiruter.

The electricity sector is the poster child of the abuse of political power, the mismanagement of the public sector, and the lack of will to implement governance and transparency.

According to Ghobril, losses generated by the electricity sector have cost taxpayers billions over the years while contributing to the growth of public debt and the state's dependence on borrowing from both Banque du Liban and commercial banks.

In his view, the persistence of Lebanon's electricity crisis demonstrates that the country's governance challenges are not primarily technical in nature. Rather, they stem from an inability or unwillingness to implement reforms that have long been understood.

The IMF similarly highlights weaknesses in the governance of state-owned enterprises, warning that opaque management practices and inadequate accountability mechanisms continue to generate fiscal risks while creating opportunities for corruption.

For Ghobril, progress in electricity reform would carry significance far beyond the sector itself. Successful implementation would signal to international financial institutions, foreign investors, and donor governments that Lebanon is prepared to tackle some of its most entrenched governance problems.

Anti-money laundering and international credibility

Another area where Ghobril sees urgent need for action is anti-money laundering reform.

The IMF notes that Lebanon has established a formal anti-money laundering framework and adopted measures such as beneficial ownership transparency requirements and monitoring mechanisms for politically exposed persons. However, it concludes that enforcement remains limited and that governance vulnerabilities continue to constrain efforts to detect illicit financial flows, prosecute offenders, and recover criminal proceeds.

Those weaknesses have acquired greater significance as Lebanon faces mounting international scrutiny. The country has remained on the Financial Action Task Force (FATF) gray list since October 2024 and was added to the European Union's list of high-risk jurisdictions in June 2025.

According to Ghobril, addressing anti-money laundering deficiencies is no longer simply a regulatory issue. It is central to restoring confidence in Lebanon's financial system and broader economy.

He argues that international concerns extend beyond the formal banking sector and are increasingly focused on economic activity occurring outside official channels. In particular, he points to the growth of the shadow economy, which includes tax evasion, smuggling, and other illicit activities that undermine state revenues and distort competition.

The main reason Lebanon was put on the FATF gray list is not because of weaknesses in the formal banking sector. It is because of the shadow economy.

The IMF reaches a similar conclusion, warning that weak enforcement capacity and governance shortcomings continue to limit the effectiveness of institutions tasked with combating corruption-related financial crimes.

For Ghobril, meaningful progress in this area would help Lebanon improve its international standing, strengthen investor confidence, and move toward eventual removal from enhanced monitoring regimes.

From diagnosis to implementation

While the IMF's findings are extensive, its recommendations are equally ambitious. The report calls for strengthening judicial independence, reforming central bank governance, improving financial sector supervision, enhancing public financial management, reinforcing anti-corruption institutions, and building a more professional and merit-based civil service.

Some progress has already been made. The IMF cites the adoption of the Law on the Organization of the Judiciary in July 2025 and the completion of long-delayed judicial appointments as important steps toward strengthening governance and rebuilding trust in public institutions.

Yet Ghobril believes the central challenge remains implementation.

"The reform process has been very slow," he said.

The will existed in speeches, presentations, and plans, but the implementation lagged.

He points to the optimism that followed President Aoun's election and the formation of the Salam government. Reform commitments generated positive reactions among Lebanese citizens, the diaspora, international institutions, and foreign partners. However, many of those expectations have yet to translate into visible improvements in daily life or the business environment.

Seven years after the start of Lebanon's economic crisis, the priorities outlined by the IMF are largely understood. International institutions can provide assessments, expertise, and technical assistance, but implementation ultimately depends on political commitment.