Lebanon enters new IMF talks amid economic crisis

Lebanon on Tuesday began new talks with the International Monetary Fund on a bailout to help the country emerge from the worst economic crisis in its history, with progress stalled by its inability to pass banking reforms.

An IMF staff-level agreement reached in April 2022 laid out conditions to unlock assistance, including a law on the distribution of losses in the banking sector, known as the financial gap law, which parliament has still not voted on.

The two sides will meet until Friday and "what matters is we come out of this week with a preliminary agreement," Finance Minister Yassine Jaber said.

At a press briefing, Jaber said the sticking point remains the adoption of a law distributing losses between the state, the central bank, commercial banks, and depositors.

The cabinet submitted a draft to parliament in 2025, but the text is contested by the banking sector and political parties, preventing a vote.

Differences over estimates of losses and their distribution have stalled negotiations with the IMF.

In 2022, the government estimated losses resulting from the 2019 financial crisis at around $70 billion, a figure believed to have increased over the last seven years during which the crisis has remained unresolved.

"Lebanon cannot continue with a cash economy and without an effective banking sector," Jaber said, adding that "the only solution is for the gap law currently in parliament to be passed... and for us to begin reforming the banking sector."

Parliament last year adopted banking secrecy reform, followed by a law on restructuring the sector, two other IMF conditions.

The crisis has deprived savers of access to their deposits and pushed them towards using cash, with a loss of confidence in the banking sector.

In August, the World Bank estimated the Lebanese economy would shrink 6.4 percent this year, as two successive wars between Israel and Iran-backed Hezbollah since 2023 have derailed efforts to revive the economy.