Lebanon plans to seek International Monetary Fund aid after approving an economic rescue plan setting out vast losses in its financial system, as it aims to chart a course out of the most destabilising crisis since its 1975-90 civil war.
Rooted in decades of state waste, corruption and bad governance, the crisis is causing mounting economic hardship and fuelling unrest. A protester was killed during rioting in the northern city of Tripoli this week and dozens of security forces were wounded.
Lebanon will use the plan to negotiate an IMF programme, Prime Minister Hassan Diab said after it was approved by cabinet.
“If we get (IMF support), and God willing we will, it will help us to pass through this difficult economic phase, which could be three, four or five years,” said Diab, a little-known academic until he was nominated premier in January by the Iran-backed Shi’ite group Hezbollah and its political allies, including President Michel Aoun’s party.
“The road ahead will not be easy, but our determination and optimism will help us.”
The multi-faceted crisis has brought economic difficulties on a scale unseen before in Lebanon, even during its civil war.
Saddled with one of the world’s biggest public debt burdens, the state defaulted on its sovereign debt in March for the first time. The government declared hard currency reserves had hit critically low levels and were needed for vital imports.
The local currency has shed more than half its value and savers have been largely shut out of their deposits since October, when countrywide protests erupted against ruling politicians.
Consumer goods prices in the import-dependent country have shot up by 50% since then.
The IMF is widely seen as Lebanon’s only way to secure financing. Foreign governments that have supported Lebanon in the past have said it must implement long-delayed reforms before it gets any aid this time.
Lebanon is seeking external finance support in excess of $10 billion, Diab said. That is in addition to some $11 billion of funds that were pledged at a Paris donors’ conference in 2018 for infrastructure projects but were conditional on long-delayed reforms.