Lebanon and the hope of an IMF breakthrough

Lebanon’s pursuit of an agreement with the International Monetary Fund (IMF) has once again emerged as the centerpiece of the country’s economic recovery strategy. The government has renewed its commitment to implementing long-delayed reforms in the hope of securing an IMF-supported program capable of restoring international confidence and unlocking much-needed financial assistance.

During a meeting at the Grand Serail with ambassadors and senior diplomats from European Union (EU) member states, as well as representatives from the United Kingdom (UK), Switzerland, Norway, Canada, and Australia, Prime Minister (PM) Nawaf Salam reaffirmed that reaching an agreement with the IMF remains a national priority.

Lebanon remains determined to achieve a program with the IMF, in line with the commitments set out in the government’s ministerial statement.

Meanwhile, international partners responded with cautious optimism but stressed that Lebanon’s credibility now depends on translating political commitments into concrete legislative and institutional reforms.

Lebanon still falls short of IMF conditions

In an interview with The Beiruter, economic analyst Professor Jassem Ajaka noted that official statements describing an IMF agreement as a national priority reflect political reality but should not be mistaken for evidence that Lebanon is close to concluding a deal.

Lebanon remains very far from meeting the IMF’s conditions. We are genuinely still a long way off; economically, financially, and monetarily.

He explained that Lebanon has yet to satisfy the IMF’s preliminary requirements known as the Staff-Level Agreement (SLA). These conditions must be fulfilled before the IMF Executive Board can approve any formal lending program. Only after completing this initial stage would Lebanon enter a longer reform program requiring extensive structural changes under what economists commonly refer to as the Washington Consensus framework.

Ajaka believed Lebanon remains far from meeting those initial benchmarks across the economic, fiscal, and monetary sectors. While some legislative progress has been achieved, notably amendments to banking secrecy legislation and the adoption of the banking restructuring law, these measures remain insufficient.

He also noted that disagreements continue over key amendments to the banking restructuring law, while the conflict that erupted in 2026 has further complicated negotiations by worsening economic contraction and rendering many of the macroeconomic assumptions contained in the 2022 IMF framework obsolete.

Perhaps more importantly, Ajaka argued that Lebanon still lacks a unified national strategy in its negotiations with the IMF. Instead, disputes persist between the government, Banque du Liban (BDL), and the IMF over fundamental issues such as the allocation of financial losses, the independence of the central bank, and judicial reform. In his assessment, this institutional fragmentation has allowed the IMF to dictate the negotiation agenda rather than engage with a coherent Lebanese reform plan.

Banking reform and the gap law remain the core obstacles

Professor Ajaka described the banking restructuring law and the proposed Gap Law as the 2 decisive pillars upon which any IMF agreement ultimately depends.

Although Parliament has already approved the banking restructuring legislation, he explained that the IMF has not yet fully endorsed the law. More significantly, its implementation remains legally tied to the adoption of the Gap Law, which is still under parliamentary review.

The principal obstacle remains the politically sensitive question of how financial losses should be distributed among the state, the banking sector, the central bank, and depositors. Without consensus on this issue, neither law can achieve its intended objective.

Ajaka stressed that, from the IMF’s perspective, these 2 laws are non-negotiable prerequisites. Without them, the Fund will not release financial assistance, while other international donors and investors are likewise unlikely to commit resources.

He nevertheless argued that their importance extends far beyond IMF conditionality. Lebanon’s cash-based economy, which has expanded dramatically since the banking collapse, has contributed to the country’s placement on the Financial Action Task Force (FATF) grey list. Restoring confidence in the banking system would gradually reduce reliance on cash transactions, encourage financial inclusion, and help normalize economic activity.

Similarly, the Gap Law is essential because it establishes a transparent hierarchy for distributing financial losses. Until depositors gain clarity regarding the future of their savings, Ajaka believed confidence in Lebanese banks cannot realistically return.

These 2 laws are, in my opinion, a million times more important for Lebanese citizens than the IMF’s own financing package.

What an IMF agreement could mean for Lebanon’s economy

Should Lebanon successfully satisfy the IMF’s conditions and secure a formal agreement, Professor Ajaka believed the economic benefits would be significant, although they would not materialize immediately.

An agreement would restore Lebanon’s access to international financial markets after years of isolation following the country’s default on Eurobond payments. It would also facilitate broader financial support from institutions such as the World Bank, the EU, Arab partners, and other international donors.

The IMF may provide Lebanon with approximately $3 billion, but that amount is, in essence, a ticket, or a quality label, from the IMF that reassures the international community.

Banking sector restructuring would gradually encourage capital inflows and foreign investment while allowing commercial banks to resume their traditional role of financing businesses, housing, and consumer lending.

However, Ajaka cautioned that ordinary Lebanese citizens should not expect immediate relief. IMF-supported reform programs inevitably involve difficult fiscal adjustments, including higher taxes and broader austerity measures. Citizens are therefore likely to experience additional economic hardship before the benefits of reform become visible.

Over the medium term, however, he expects a more stable exchange rate following currency unification, lower inflation, renewed economic growth, stronger purchasing power, and the gradual recovery of a functional banking sector capable of supporting investment and consumption.

European delegation calls for accelerated reforms

The discussions at the Grand Serail between PM Salam and European diplomats highlighted 3 reforms viewed as indispensable for any IMF agreement.

First, Parliament is expected to advance the restructuring and reorganization of Lebanon’s banking sector, a prerequisite for rebuilding confidence after the collapse of the financial system and the freezing of billions of dollars in deposits since 2019.

Second, lawmakers are being urged to adopt the long-awaited Gap Law, which would establish a legal framework for distributing financial losses and addressing depositors’ frozen funds.

Third, European representatives reiterated that judicial independence remains an equally essential reform, arguing that no financial restructuring can succeed without strong institutions capable of enforcing transparency, accountability, and the rule of law.

In this context, European officials stressed that every delay prolongs Lebanon’s economic crisis, discourages foreign investment, and postpones international financial support. For Beirut, an IMF agreement is therefore viewed not simply as access to funding but as a gateway toward restoring credibility with international partners and financial markets. Achieving that breakthrough, however, will require sustained political consensus and the willingness to undertake reforms that, while difficult in the short term, could lay the foundations for long-term economic recovery.