NNA - An International Monetary Fund mission, led by Ernesto Ramirez Rigo, concluded its 3-day visit to Beirut (September 15 to 18, 2026) during which it discussed macroeconomic prospects and the progress made on key economic and financial reforms.
Winding-up the visit, Rigo issued a statement that shed light on the repercussions of the conflict between Hezbollah and Israel and the regional security developments, which have inflicted severe damage on the Lebanese economy and living conditions.
He said: "Economic activity is projected to contract significantly in 2026, while inflation remains in the double digits and the current account deficit has widened, driven primarily by rising energy costs. Extensive damage has also been sustained by infrastructure and housing, and Lebanon has witnessed waves of large-scale internal displacement, accompanied by a significant deterioration in the living standards of the displaced."
Amidst these extremely difficult circumstances, Rigo said the mission commends the Lebanese authorities for maintaining a degree of stability, namely through the continued pursuit of prudent fiscal and monetary policies.
"The mission welcomed the progress made in budget management since the experts' previous visit, considering it as a significant step toward a more sustainable fiscal position," he added, noting as well that Fund experts also welcomed Lebanon's adoption of amendments to the law on bank regulation and resolution. "These amendments align with international best practices and provide an effective, orderly framework for bank resolution and liquidation, thereby establishing a suitable foundation for addressing the banking sector crisis," Rigo asserted.
"Building on this progress, and following intensive engagement in recent months, discussions with the authorities focused on the amendments needed to align the Financial Stability and Deposit Recovery Law with international standards," Rigo explained.
He added, "Fund experts emphasized, in particular, the importance of respecting the creditor priority order, ensuring that depositors do not bear losses before shareholders and lower-ranking creditors, and the necessity for the restructuring process to result in a sound and sustainable banking sector that maintains financial sustainability and the sustainability of the financial sector as a whole."
Referring to the increase in the VAT rate to 12 percent which was recently approved by the Council of Ministers with the aim of funding the public sector wage and pension hikes authorized in February 2026, Rigo noted that this has not yet been implemented, even as the associated wage costs place significant pressure on future spending. "Fund staff urged the authorities to proceed with the legislative enactment of this increase, comprehensively incorporate all externally funded expenditures into the 2027 budget, prioritize support for internally displaced persons, and create space for investment spending," he said.
Rigo noted that Fund staff also warned against any further discretionary increases in salaries or pensions without offsetting revenue-raising measures, recommending that any such actions be considered exclusively within a comprehensive fiscal framework.
"Fund staff welcomed the preparation of a medium-term fiscal framework (MTFF). The mission made good progress with the authorities in further developing and refining the MTFF, though additional work is needed to prioritize and sequence fiscal measures and to appropriately incorporate investment and social spending needs," Rigo went on. "Once finalized, the adoption of a credible MTFF will be essential to anchor annual budgets, restore fiscal sustainability, and help create fiscal space for necessary reconstruction and social protection spending," he explained.
He concluded by reiterating the Fund's commitment to supporting the Lebanese authorities in formulating and implementing a comprehensive reform agenda that could gain support through an IMF program. "To this end, the authorities and the expert team will continue their discussions actively. The expert team thanks the authorities for their close cooperation and constructive engagement," Rigo asserted.
