issued The International Monetary Fund (IMF) a stark warning regarding Lebanon's financial and economic situation, emphasizing that the country is going through an exceptional and critical phase requiring immediate international intervention. In this context, Dr. Jihad Azour, Director of the Middle East and Central Asia Department at the IMF, stated that Lebanon is among the countries most affected by current geopolitical tensions and regional conflicts, stressing that the Lebanese state's capacity to absorb these shocks and cope with the effects of war appears very weak.
Context of the crisis: historical and economic factors
To understand the gravity of the current situation, it is essential to consider the broader context and historical background of the crisis. the Lebanese economy an unprecedented financial collapse, which the World Bank has ranked as one of the three worst economic crises globally since the mid-19th century. The local currency has lost over 95% of its value. This crisis has been compounded by the freezing of depositors' funds in banks, the repercussions of the COVID-19 pandemic, and the catastrophic Beirut port explosion in 2020. All these factors have rendered the infrastructure and economy extremely fragile, explaining the IMF's current warnings that any further shock could lead to a complete collapse.
The consequences of war: mass displacement and widespread destruction
In an exclusive interview with Al Arabiya Business on the sidelines of the IMF and World Bank Spring Meetings, Azour explained that Lebanon is in dire need of urgent economic assistance. He revealed shocking figures, indicating that approximately 20% of Lebanese citizens have been displaced from their homes, while vast areas in southern Lebanon have suffered widespread destruction of infrastructure and property. Azour added, “The scale of the humanitarian, social, and economic impact of the war on Lebanon is immense, and the country’s capacity to withstand it is limited given its already fragile economic and financial situation.”
The importance of international support and its regional impact
The importance of saving Lebanon transcends its geographical borders; Lebanon's stability is a regional and international interest. Domestically, swift support will contribute to achieving social stability and preventing a collapse in living standards. Regionally and internationally, abandoning Lebanon to its fate could lead to large-scale waves of illegal migration to Europe, as well as create a security vacuum that could further complicate the situation in the Middle East. Therefore, Azour called on donor countries and international institutions supporting Lebanon to provide rapid support to strengthen the country's resilience through economic and financial measures that protect Lebanon from major political and security shocks.
Financial gap and protecting depositors' funds
On the technical and financial front, Azour noted progress in negotiations with Lebanese authorities to provide a support package for the economy. He confirmed that these negotiations would be finalized during the Spring Meetings, with a particular focus on addressing the “fiscal gap law.” The IMF stressed the need for clear mechanisms to guarantee the protection of depositors’ funds, giving top priority to protecting small depositors who have been severely affected by the banking crisis.
Looking ahead: Reassessing the Lebanese economy
In closing, the Director of the Middle East Department at the International Monetary Fund revealed that the Fund is currently undertaking a comprehensive reassessment of the Lebanese economy in the post-war period. This step comes amidst bleak economic forecasts indicating the potential for further increases in inflation rates, in addition to a direct and profound negative impact on GDP, necessitating a comprehensive and internationally supported recovery plan to rescue the country from its multifaceted crisis.
