IMF Mission Final Statement: Bank Reforms and Deposit Protection Are Our Priorities

The Ministry of Finance published the final statement of the International Monetary Fund (IMF) mission’s visit to Lebanon, noting that Lebanese authorities have managed to maintain a degree of macroeconomic stability despite exceptionally difficult circumstances and significant repercussions from the conflict between Hezbollah and Israel, along with regional security developments, on the economy and living conditions.

Enacting amendments to the law regulating and addressing banking sector conditions represents a significant step forward in implementing the strategy for restructuring the banking sector. Completing the reform agenda requires continued efforts to align the Financial Stability Law and deposit recovery mechanisms with international standards, maximizing depositor protection while ensuring consistency with financial sustainability and long-term viability of the financial sector.

Maintaining fiscal discipline and adopting a credible medium-term fiscal framework are key elements in laying the foundation for restoring financial sustainability and public debt sustainability, while also creating fiscal space for essential spending on reconstruction and social protection.

An IMF mission led by Mr. Ernesto Ramírez Rígo concluded its visit to Beirut, Lebanon, which lasted from September 15 to 18, 2026, discussing prospects for the macroeconomy and progress made in major economic and financial reforms.

At the end of the visit, Rígo issued the following statement: "The conflict between Hezbollah and Israel and regional security developments have once again inflicted severe damage on Lebanon's economy and living conditions. Economic activity is expected to contract significantly in 2026, inflation remains in the double digits, and the current account deficit has widened, primarily driven by rising energy costs. Widespread damage has been done to infrastructure and housing, and Lebanon has experienced large-scale internal displacement, with a sharp deterioration in living standards among internally displaced persons. Under these extremely challenging conditions, the mission commends the Lebanese authorities for maintaining a degree of stability, including through continued adherence to cautious fiscal and monetary policies."

He added: "The mission welcomes the progress made in budget management since the previous expert visit, which marks an important step toward a more sustainable fiscal position. IMF experts also welcome the adoption of amendments to the law regulating and addressing banking sector conditions, which align with international best practices and provide an effective and structured framework for dealing with troubled banks and their liquidation—laying a solid foundation for resolving the banking sector crisis."

He continued: "Building on this progress and based on intensive consultations over recent months, discussions with authorities focused on required adjustments to align the Financial Stability Law and deposit recovery mechanisms with international standards. IMF experts particularly emphasize the importance of respecting creditor hierarchy, ensuring that depositors do not bear losses before shareholders and subordinated creditors, and that the restructured banking sector emerges sound and sustainable, preserving financial sustainability and sectoral resilience. In this context, efforts should focus on aligning the draft law with international principles, and the proposed deposit repayment scheme must be consistent with the banking sector’s ability to sustain itself and with public debt sustainability."

"The authorities have appropriately maintained fiscal discipline under financing constraints. Discussions centered on the 2027 budget draft, and IMF experts welcome the goal of achieving a balanced fiscal position and measures to strengthen tax compliance. However, the increase in the value-added tax rate to 12 percent, approved by the Council of Ministers and originally intended to finance the rise in public sector wages and pensions approved in February 2026, has not yet taken effect, while associated wage costs add substantial pressure to future spending. The experts urge the authorities to move forward with enacting this increase legislatively, include all externally financed expenditures comprehensively in the 2027 budget, prioritize support for internally displaced persons, and create room for investment spending. They also warned against any additional selective increases in salaries or pensions without corresponding revenue-raising measures, recommending that any such actions be assessed exclusively within a comprehensive fiscal framework."

He concluded: "IMF experts welcome the preparation of a medium-term fiscal framework (MTFF). The mission has made good progress with authorities in further developing and refining the MTFF, though additional work remains on defining priority fiscal measures and sequencing their implementation, as well as properly integrating investment and social expenditure needs. Once completed, adopting a credible medium-term fiscal framework will be essential for guiding annual budgets, restoring fiscal sustainability, and enabling space for necessary spending on reconstruction and social protection. The Fund remains committed to supporting Lebanese authorities in designing and implementing a comprehensive reform agenda that can be backed by an IMF program. To this end, authorities and experts will continue active discussions. The expert team thanks the authorities for their close cooperation and constructive engagement."