News dalla rete ITA

10 Marzo 2023



The Issam Fares Institute for Public Policy & International Affairs (IFI) at the American University of Beirut issues a report on why an IMF program is needed in Lebanon.  The most important aspect of an IMF-supported program is the credibility that it would give to Lebanon's economic policies, and this is the key argument as per the report.  This single consideration is more important than the amount of IMF lending.  Lebanon could implement a reform program without IMF involvement.  However, the IMF's participation - by helping to formulate the program, monitoring its implementation, and providing an independent assessment of the appropriateness of policies - would give Lebanon's reform program the credibility it needs that appropriate policies are being taken to address its macroeconomic imbalances and structural weaknesses.  Lebanon would also receive substantial additional financial support for implementing an IMF program.  While the funding to be provided by the IMF is significantly below Lebanon's needs, an agreement with the IMF would lead donors and creditors to provide significant assistance to Lebanon.  International financial institutions, like the World Bank, and other bilateral creditors and donors, would provide financial support to Lebanon once the IMF Executive Board approves the program.  This aspect of IMF programs is quite common, and it is referred to as the IMF's catalytic role.  Irrespective of the amount to be provided by the IMF, an IMF program would not be approved by the IMF Executive Board without assurances from donors and creditors that Lebanon's external financing needs will be met.  This additional support is estimated at about USD 8-10 billion over the four-year duration of the program.  An arrangement with the IMF would also facilitate negotiations with bond holders.  Bond holders have made an agreement on the restructuring of the public debt contingent on an IMF program, as they have done with other countries before.  Bond holders need assurances that Lebanon will be able to honor the renegotiated terms of the bond contracts, and an IMF program would help provide these assurances.  Lebanon may receive additional financial support from the IMF once program implementation begins.  Under IMF policy, lending to Lebanon is limited to specific multiples of its quota with the IMF given that the Lebanese government is currently in default.  IMF lending to countries whose public debt is assessed to be unsustainable is limited to 145% of their quota per year, or a cumulative of 435% at any time.  Lebanon's quota is SDR 633.5 million, equivalent to about USD 840 million.  This lending limit translates to about USD 1.2 billion per year, subject to ceiling of about USD 3.6 billion for total lending.  Amounts in excess of these limits are considered exceptional and are subject to additional criteria related to the need for higher financing, debt sustainability, the ability to regain market access, and prospects for the program's success.  The IMF may therefore have some room to increase lending to Lebanon, even if Lebanon's debt is assessed as unsustainable, in the event that there is a balance of payments need and the program is on track.  (ICE BEIRUT)

Fonte notizia: Bank Audi, Lebanon Weekly Monitor, 27 Feb. - 5 March 2023