Special drawing rights (SDRs) will not solve Lebanon’s long-term structural problems and the country needs a government empowered to reform the economy in order to address them, IMF Managing Director Kristalina Georgieva said on Wednesday.
“But the SDRs are not going to fix Lebanon’s longer-term structural, systemic problems. What do we need for that? We need a government that is empowered to reform and revitalize Lebanon’s crippled economy,” Georgieva stated.
Georgieva said the government must first tackle head-on the fundamental problem of weak governance by strengthening anti-corruption measures, improving the performance of state functions and completing an audit of the central bank and the electricity provider.
“Second, implement a fiscal strategy, combining deep debt restructuring and reforms to restore credibility of the country,” she added.
The IMF chief said Lebanon should also pursue a comprehensive restructuring of the financial sector as it needs a credible monetary and exchange rate system supported by unification of exchange rates.
“So for us, for the IMF, there is the urgency to act today, and the importance of a longer-term transformation of the Lebanese economy. On the urgency to act,” she said. “We do now have the August 2 vote of our Board of Governors for the $650 billion new SDR allocation, to be distributed in a couple of weeks according to quota shares. For Lebanon, this is not trivial. Lebanon would receive about $860 million of SDRs at this critical moment to strengthen the country’s depleted reserves and also to help with the many urgent needs of the Lebanese people.”
Georgieva said the SDRs are a precious resource that must be deployed for the maximum benefit of the country and its people.
“How to use SDRs, of course, is a sovereign decision – but it must be a good decision. The Lebanese people have the right to know what are these SDRs going to do for them – and I call upon our international and domestic partners: work with us to help ensure transparency and accountability of the deployment of Lebanon’s new SDRs allocation,” she said
However, Georgieva pointed that a broader political, social and economic reform has not taken place and, on the contrary, a dramatic deterioration in the living conditions can be observed.
“Over the past year, we have been available for the Lebanese authorities, but let me be very honest: engagement is severely constrained by the absence of an effective government. So, let me again urge Lebanon’s political leaders to coalesce around a new government that has the will and the mandate to implement reforms,” she said.
Last week, Najib Mikati, who has served as prime minister in the past, was authorized by the Lebanon’s parliament and president to form a government. Since 2019, Lebanon has suffering a deep economic crisis with the national currency having lost more than 80 percent of its value and the population facing shortages of fuel and other commodities.