The Lebanese public needs to know: without some course change, Lebanon will not get the International Monetary Fund (IMF) program it desperately needs to save its economy. There’s still some chance to save Lebanon from its economic catastrophe—but it depends on an informed Lebanese public making themselves heard, and demanding the country’s leaders do what’s necessary to rescue the country.
Lebanon is suffering one of the worst economic crises in modern history. GDP has contracted by almost 40 percent since 2018, wiping out years of economic growth. The national currency is now worth almost nothing. More than half of Lebanese are now living in poverty.
The International Monetary Fund (IMF) is ready to help Lebanon—and few countries in recent memory have needed an IMF program so badly. An IMF program would provide not just $3 billion from the IMF, but also another $10 billion that other donors have conditioned on an IMF program and reforms. It would allow Lebanon to again access international lending markets. Perhaps most importantly, the reforms that the IMF has requested are vitally important to restoring macroeconomic stability—they are things that Lebanon needs to do, with or without the IMF.
Yet negotiations over the IMF program are failing, because Lebanese elites have undercut the process at every turn. What’s more, those elites have misled the Lebanese public about the reality of the country’s dire situation.
This sabotage will have terrible consequences for Lebanon. No IMF program means Lebanon will continue its descent into poverty and misery. It means more of the so-called “shadow plan”—the non-IMF program that the country’s ruling class has been implementing since 2019.
Our new report, “The Shadow Plan: How Lebanese Elites Are Sabotaging Their Country’s IMF Lifeline,” published by The Policy Initiative and Century International, sheds light on how the IMF talks have really proceeded, and how Lebanon’s elites have consistently undermined them. The report draws on tens of interviews with Lebanese officials; politicians; experts and civil society leaders; and representatives of donor countries and international institutions.
Unfortunately, Lebanon’s first attempt at negotiating an IMF deal, in 2020, was defeated by a revolt of political and financial elites. In April 2022, a new Lebanese government signed a preliminary “staff-level agreement” with the IMF. To reach a full agreement on an IMF program, though, Lebanon still needs to implement roughly ten structural reforms, or “prior actions.” More than a year later, it has achieved almost none.
There are two main reasons why Lebanon’s IMF talks have stalled, both related to Lebanese elites’ basic antipathy to reform.
The first reason is a structural flaw in Lebanon’s negotiations with the IMF: Lebanon’s official negotiating team, led by Deputy Prime Minister Saade Chami, does not represent the country’s political class. Chami is alone, effectively; he has no dedicated staff and little apparent political backing. The broader political class is not committed to the Chami team’s recovery plan—that matters when, for example, parliament needs to pass reform legislation, and instead it passes gutted, substance-free “reforms” that the IMF considers unacceptable. For its part, the IMF has tried to adapt to Lebanon’s fragmented politics, but it cannot force Lebanese decision-makers to reform.
The second reason is a political discourse filled with bad-faith anti-IMF narratives and misinformation. Powerful interest groups—including Lebanon’s politically influential banks—have saturated the country’s political media with falsehoods, including that the government’s recovery plan would erase ordinary bank depositors’ savings. (It will not.) The Lebanese public has gotten very little straight information on where the country’s IMF talks really stand.
Instead of an IMF program, Lebanon’s elites are executing “the shadow plan.”
Lebanese politicians regularly claim they are committed to achieving an IMF program. Their actions say otherwise. Many apparently believe that the country is reaching a new equilibrium and that, actually, an IMF program isn’t necessary after all. This automatic rebalancing could stabilize Lebanon’s economy at some new, very low level—but only at a grave social cost, on the backs of the country’s middle class and poor.
Hope is not entirely lost. There is more that interested parties can do. For example, the IMF should improve its public communication, in order to cut through the nonsense in Lebanon’s media. The Fund should also continue its recent direct engagement with members of parliament. Donor countries, for their part, should insist that the government properly resource Lebanon’s negotiating team, including paying for communications staff who can actually keep the public apprised of talks’ progress.
And Lebanon’s civil society and reformist elements in government should keep working to inform the public about Lebanon’s IMF talks, and what’s really at stake. It is the Lebanese public, after all, for whom Lebanon’s IMF talks matter most. They deserve to know the truth about the country’s IMF’s talks and about what’s next for Lebanon, so they can reclaim some agency and help decide the country’s economic future.
There is still some hope that public pressure can convince Lebanon’s leaders to act responsibly. But failing that, Lebanese people should at least know how their elites have failed them, so they can try to hold those elites accountable.
Header image: An aerial view at dusk of the Mar Mikhael neighborhood near the port during a power outage on August 2, 2021 in Beirut, Lebanon. Source: Roudy Doumit/Getty Images