The IMF inquires but does not decide

An International Monetary Fund (IMF) delegation headed by Ernesto Ramirez Rigo and comprising 9 members is concluding its visit to Lebanon, carrying with it numerous answers to questions that had been circulating regarding the reform laws issued by the Lebanese government.

The IMF had a series of question marks regarding certain points mentioned in the Financial Reform and Financial Gap laws. At the request of IMF Managing Director Kristalina Georgieva, following her meeting with Prime Minister Nawaf Salam at the World Economic Forum in Davos, the delegation visited Lebanon. Notably, Georgieva described her meeting with Salam in a post on her X account as constructive and positive.

Nida Al Watan learned from sources participating in the meetings that the IMF delegation has not reached a final position on the issued laws; particularly the Financial Gap and Banking Reform laws. Rather, its discussions focused on completing and following up on the legislation by raising questions and seeking clarification regarding both laws.

The delegation’s meetings with concerned officials were repeatedly and regularly focused on the Ministers of Finance and Economy, as well as Banque du Liban (BDL) in particular, to seek clarification about the Banking Reform and Financial Gap laws, without expressing a definitive opinion on either.

Banks’ observations on the law

Naturally, BDL presented its remarks on the Financial Gap law to the IMF delegation. Regarding the possibility of adopting banks’ observations on the law, former minister and banker Raed Khoury explained to Nida Al Watan that banks are committed to the central bank’s position and stand behind it, listing what he described as the missing elements in the Financial Gap law as follows:

- The state must fulfill its obligations and share in covering the financial gap, as it is the party that spent depositors’ funds; an issue not addressed in the Financial Gap law.

- Large depositors should not be considered of lesser importance than small depositors, and their funds cannot be returned after 20 years.

- Banks are unable to restore their capital by attracting new investments. Investors will not inject money into banks if future returns are expected to be used to repay old deposits. What primarily concerns investors is achieving returns on the funds they invest. The Financial Gap law does not address the future financial viability that would be offered to investors.

It is worth noting that investors in banks, under the system, can be either domestic or foreign. In both cases, such investments are unlikely to materialize if they are intended to repay deposits, especially while the state, under the Financial Gap law, would not participate in settling any of its outstanding debts; an approach considered inequitable.

In this context, it should also be noted, as has become widely known, that Banque du Liban is preparing its file to highlight the state’s obligations toward the central bank, including the $16.5 billion debt; an amount considered relatively small compared to the state’s overall liabilities, which exceed three times that figure.

Key messages repeated by Georgieva regarding Lebanon

- The IMF is committed to supporting Lebanon amid the economic crisis it is facing, and has previously expressed readiness during other meetings to work with Lebanese authorities to achieve stability and economic recovery.

- She consistently stressed the necessity of implementing clear structural reforms as a fundamental condition for approving any formal support program between Lebanon and the IMF. This includes realistic fiscal, monetary, and banking reforms.