The Lebanese government has been negotiating with the IMF regarding the necessary reforms to lift the country from the crisis. However, such talks have stalled after the IMF rejected the initial plan submitted by the Lebanese side. The IMF declared that Lebanon should cover five axes of reform which are: (1) restructuring the public sector, (2) solving the banking crisis, (3) establishing a stable exchange rate, (4) fixing the electricity sector, and (5) establishing transparency to limit corruption.

The government submitted a plan that focused exclusively on the banking crisis and suggested a haircut on depositors that would limit bank losses. The plan included a forced conversion of dollar-denominated deposits into Lebanese pounds at variable exchange rates (also called “lirafication” of deposits). LIMS explained that implementing this scheme would cause considerable losses to depositors and further inflation in the national currency. LIMS argued that any reform in Lebanon needs to start by forming a currency board to achieve a stable exchange rate that would act as a bedrock for other reforms. Solving the banking crisis under a currency board will reduce depositors’ haircut since it protects and increase the central bank’s reserves and blocks the government’s attempt to squander them.

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