The International Monetary Fund (IMF) issued a warning that Lebanon is in a precarious state, a year after committing to reforms that have yet to be put into action. The warning emphasized that the Lebanese government should refrain from borrowing from the central bank. LIMS highlighted that the same day of the IMF’s warning, the government decided to borrow additional funds from the central bank at odds with the IMF’s recommendations.

Those funds would be used to increase public sector salaries fueling the wages-inflation cycle. Despite the government’s claim of seeking an accord with the IMF, no serious actions have been executed. LIMS believes that it is not in the interest of the decision maker to move forward with the agreement yet. They prefer to expend the remaining 9 billion dollars of foreign exchange reserves without transparency or oversight. Once these funds are exhausted, the final agreement may come into effect.  

In order to break this downward trajectory, LIMS argued that Lebanon should freeze foreign exchange reserves, and return them to the depositors. Only then the government would be inclined to seriously pursue the deal with the IMF and start making significant reforms in Lebanon. As long as the central bank still has money, the government will continue its spending spree without any appropriate reform plan in place.

• International Monetary Fund Mission Warns Of The Seriousness Of Lebanon’s Economic Situation, March 24, 2023: Alyawm, TV Interview AR
• IMF Warning And Reforms, March 26, 2023: VDL, TV Interview AR
• There Is No Seriousness In The Government’s Dealings With The International Monetary Fund, As It Decided To Borrow Again From The Banque Du Liban, March 30, 2023: VDTL, Radio Interview AR