Lebanon's Financial Crossroads: IMF Intervention and the Promise of Reform

The International Monetary Fund is pushing Lebanon to amend a draft rescue law vital for accessing frozen depositors' funds, as the country grapples with its financial crisis. The draft aims to equitably allocate losses from the 2019 crash, but IMF seeks clearer claims hierarchy provisions.

The International Monetary Fund (IMF) is urging Lebanon to revise a draft law crucial to addressing its deepest financial crisis and enabling depositors to reclaim savings that have been inaccessible for six years, according to Prime Minister Nawaf Salam.

This "financial gap" legislation, a key component in Lebanon's potential access to IMF funds, aims to distribute losses from the 2019 economic downturn among the state, central bank, commercial banks, and depositors. During a World Economic Forum meeting, Salam conveyed the IMF's call for more explicit clarity in claims hierarchy, an essential part of the law governing loss allocation.

Lebanon, which estimated crisis-related losses at $70 billion in 2022, is under pressure to finalize an IMF program amid a grey-list financial status, with risks of escalating to a blacklist. The draft law proposes a pathway for depositors to recover funds over four years, initially prioritizing smaller accounts, alongside bank auditing to trace financial responsibility.

(With inputs from agencies.)