The International Monetary Fund (IMF) warned in a report issued Thursday, that Lebanon, without reforms, will continue to witness inflation exceeding the 100%.
The fund stated that the total public debt in the country, which is suffering from a severe economic crisis, may reach about 550% of the gross domestic product (GDP) by 2027.
The report came as a follow-up to a nine-day visit by Fund officials in March.
The talks aimed at putting the final touches on the rescue package that Lebanon needs from the fund have largely stalled. Since reaching an initial agreement with the fund more than a year ago, Lebanese officials have made only limited progress on the path of reforms needed to conclude the agreement. The measures include restructuring the country's debt and ailing banking system, fixing the barely functioning state electricity system, and improving governance.
The report indicated that since Lebanon fell captive to its economic crisis in 2019, the country's GDP has decreased by about 40%, the local currency has lost 98% of its value, the inflation rate has exceeded 100%, and the central bank has lost two-thirds of its foreign exchange reserves.
The report added that the economic situation stabilized to some extent by the end of 2022, as a result of the end of coronavirus restrictions, the recovery of tourism, the strong inflow of remittances, and the gradual decline in international energy and food prices during the second half of 2022.
The report noted that the delay in restructuring the state's financial system and creating a state of stability for its collapsing currency benefited the borrowers, while harming those who deposited their savings in banks.
While some in the private sector were able to benefit from the currency crisis, by repaying the loans they had obtained before the crisis at exchange rates lower than the market, this situation left the country with less dollar reserves, which could be used to pay depositors whose savings had been frozen by banks.
The report indicated that the central bank’s reserves decreased to about $10 billion, compared to the pre-crisis peak when reserves were estimated at $36 billion.
Ernesto Ramirez Rigo, the IMF's Beirut mission chief warned that if the country's leaders did not undertake reforms and instead allowed the uncontrolled adjustment of the country's economy to continue, Lebanon would remain dependent on aid from the international community.
"A very small amount of investment will come into the economy and the new sectors that Lebanon needs to develop," said Rigo.
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