- The Lebanese authorities have managed to maintain a measure of macroeconomic stability despite the exceptionally difficult circumstances and the heavy toll that the Hezbollah-Israel conflict and regional security developments have taken on the economy and living conditions.
- The recent approval of amendments to the Bank Resolution Law marks a significant step forward in advancing the banking sector restructuring strategy. Completing the sector's reform agenda now requires continued work towards aligning the Financial Stabilization and Deposits Recovery Law with international standards to maximize depositor protection while ensuring consistency with fiscal and financial sustainability.
- Sustained fiscal discipline and adopting a credible medium-term fiscal framework are critical to lay the foundations for restoring fiscal and debt sustainability, while creating space for essential spending on reconstruction and social protection.
Beirut, Lebanon: An International Monetary Fund (IMF) mission, led by Ernesto Ramirez Rigo, visited Beirut, Lebanon, from September 15 to 18, 2026, to discuss the macroeconomic outlook as well as progress on key economic and financial reforms.
At the conclusion of the visit, Mr. Ramirez Rigo made the following statement:
"The Hezbollah-Israel conflict and regional security developments have once again taken a heavy toll on the Lebanese economy and living conditions. Activity is expected to contract significantly in 2026, inflation remains in double digits, and the current account deficit has widened driven mainly by rising energy costs. There is extensive damage to infrastructure and housing, large-scale internal displacements, and significant deterioration in living standards for the internally displaced people. Against this very challenging backdrop, the mission commends the authorities for preserving a measure of stability, including by maintaining cautious fiscal and monetary policies.
"The mission welcomes progress made on budget management since the last staff visit, which represents an important step toward a more sustainable fiscal position. In addition, staff welcomes the approval of amendments to the Bank Resolution Law (BRL), which align Lebanon's framework with international best practices, and provide an effective and orderly resolution and liquidation framework which will serve well in addressing the banking sector crisis.
"Building on this progress as well as on extensive engagement in recent months, discussions with the authorities focused on the amendments needed to align the Financial Stabilization and Deposits Recovery Law (FSDR) with international standards. In particular, staff reiterated the importance of ensuring that the hierarchy of claims is respected and no depositors absorb losses before shareholders and junior creditors, and that a sound and sustainable banking sector emerges from the restructuring process that safeguards fiscal and financial sustainability. In this respect, efforts should focus on aligning the draft law with international principles and make the repayment proposal consistent with banking sector viability and public debt sustainability.
"The authorities have appropriately maintained a tight budget execution given the financing constraints. Discussions focused on the draft 2027 budget, and staff welcomes that it targets a balanced position and introduces measures to strengthen tax compliance. However, the cabinet-approved VAT rate increase to 12 percent, originally envisaged to finance the public wage and pension increase approved in February 2026, has yet to be implemented, with the associated personnel costs adding significant expenditure pressures going forward. Staff encouraged the authorities to pursue legislative enactment of this increase, as well as record all foreign-financed spending comprehensively in the 2027 budget, prioritize support for the internally displaced people, and make room for capital spending. Staff cautioned against further ad-hoc salary and pension adjustments without compensating revenue measures and also recommended that any such measures be considered only within a comprehensive fiscal framework.
"Staff welcomes the development of the medium-term fiscal framework (MTFF). The mission made good progress with the authorities in further refining the MTFF, while additional work remains on the prioritization and sequencing of fiscal measures and the appropriate integration of capital and social spending needs. Once finalized, the formal adoption of a credible MTFF will be essential to anchor annual budgets, restore fiscal sustainability, and help create space for essential spending on reconstruction and social protection.
"The Fund remains committed to supporting the Lebanese authorities in developing and implementing a comprehensive reform agenda that could be supported by an IMF arrangement. To this end, the authorities and staff will maintain active discussions. The staff team thanks the authorities for their close cooperation and constructive engagement."
