Lebanon resumes IMF 'interactions', committed to fair solution for creditors

Lebanon has resumed "interactions" with the International Monetary Fund with a view to agreeing a recovery programme that can harness international support, the government said on Monday, as it seeks to address a devastating economic meltdown. Lebanon is also fully committed to a transparent and equitable debt restructuring process and welcomes bondholder interest in taking part in the process, the finance ministry said in a statement.

Lebanon has resumed "interactions" with the International Monetary Fund with a view to agreeing a recovery programme that can harness international support, the government said on Monday, as it seeks to address a devastating economic meltdown.

Lebanon is also fully committed to a transparent and equitable debt restructuring process and welcomes bondholder interest in taking part in the process, the finance ministry said in a statement. "The government reiterates its commitment to a fair and comprehensive solution for all creditors and will engage ... in good faith discussions with all its creditors as early as practicable," it said.

Lebanon has been in deep financial crisis since late 2019, since then the currency has lost some 90% of its value, poverty has soared, and the banking system has been paralysed. Beirut defaulted on its sovereign debt in March 2020, saying it needed the foreign currency reserves to meet basic needs. There was no immediate comment from the IMF, which has previously said it has had courtesy calls with members of Prime Minister Najib Mikati's government and stands ready to engage.

An adviser to the Association of Banks in Lebanon who requested anonymity said: "We welcome the government's commitment to good faith negotiations and look forward to engaging". An IMF programme is widely seen as the only way Lebanon can obtain help from foreign donors who want the government to carry out reforms to tackle the root causes of the crisis, including state corruption and waste.

IMF talks broke down last year largely because Lebanon's banking system and politicians couldn't agree with the previous government on the scale of the losses in the financial system. Agreement in Lebanon on the losses is the starting point for more IMF talks, economists say.

The economy minister has said the banking sector, central bank and other players in the financial system are working to agree on the size of the losses and how they should be distributed. Lazard, which helped Lebanon draft last year's disputed recovery plan, has been asked to resume its role as adviser in preparation for the resumption of IMF talks.

The previous plan identified a $90 billion hole in the financial system - a figure endorsed by the IMF. The government has formed an IMF negotiation team led by Deputy Prime Minister Saade Chami and including the ministers finance, economy and trade, and the central bank governor.

Lebanon's foreign debt holders, including some of the world's biggest investment funds, have urged it to begin debt restructuring talks as soon as possible.

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