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Protesters throw glass bottles at the Lebanese Central Bank building in Beirut, Lebanon, March 24. Hassan Ammar/The Associated Press

Four years after Lebanon’s historic collapse began, the small country still faces “enormous economic challenges” with a collapsed banking sector, dwindling public services, deteriorating infrastructure and increasing poverty, the International Monetary Fund warned on Friday.

In a statement at the end of a four-day visit by an IMF delegation to the crisis-hit country, the international agency welcomed the Lebanese Central Bank’s recent policy decisions to stop lending to the state and end work on an exchange platform known as Sayrafa.

Sayrafa had helped curb the rapidly growing black market that controls Lebanon’s economy, but this depleted the country’s foreign exchange reserves.

The IMF said that despite the move, a lasting solution would require comprehensive policy decisions by parliament and the government to curb payment and budget deficits and begin restructuring the banking sector and major state-owned companies.

In late August, interim central bank governor Wassim Mansouri called on Lebanon’s ruling class to quickly implement economic and financial reforms, warning that the central bank would not provide loans to the state. He also said there were no plans to print money to cover the huge budget deficit and prevent inflation from worsening.

Lebanon is facing the worst economic and financial crisis in its modern history. Since the financial crisis began in October 2019, the country’s political class – blamed for decades of corruption and mismanagement – has resisted economic and financial reforms called for by the international community.

Lebanon began talks with the IMF in 2020 to secure a bailout package. But since reaching a tentative agreement with the IMF last year, the country’s leaders have been reluctant to implement necessary reforms.

“Lebanon has failed to implement urgently needed reforms and this will weigh on the economy in the coming years,” the IMF statement said. The lack of political will to make “difficult but crucial decisions” to initiate reforms means Lebanon’s banking sector is impaired, public services are inadequate, infrastructure is deteriorating and poverty and unemployment are increasing.

Although a seasonal upturn in tourism led to an increase in foreign currency inflows during the summer months, tourism and remittance receipts remained far short of what was needed to offset a large trade deficit and a lack of external financing.

The IMF also pushed for all official exchange rates to be unified to the market exchange rate.

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