Lebanon’s economic crisis is quickly running out of control evidenced by the collapse of the currency, widespread corruption and a hyper-inflation spiral. The Lebanese pound is traded on the black market at six times the official rate whereas the country’s stock index has lost 25% since the turn of the year. This disparity has fueled galloping inflation and food prices have more than doubled over the past 6 months. In this context, as the economic and social meltdown is accelerating, the prospect of a rapid injection of liquidity by the IMF is receding.

The financial recovery plan, sent by the government to the IMF as a basis for discussion, calls for a full-size restructuring of the banking sector to address the shortfall of more than $90 billion (this is almost twice the size of the economy). The IMF has approved these figures while stating they would be ready to help once Lebanon puts an end to corruption. However, the central bank and members of parliament view these losses as grossly overestimated and refuse to put into question the efficiency of the existing banking system in place over the last 30 years.

An IMF rescue is one of the only options available for Lebanon to find a way out of their situation. For decades, foreign donors such as France and Britain have kept Lebanon afloat by bailing out their accounts, but they no longer seem to be willing to do so without far-reaching reforms.

Factually, Lebanon is bankrupt as it defaulted on its foreign debt for the first time in March. The government has been unable to halt the pound’s decline, prices exploded by more than 55% last month compared to the previous year, and food costs have risen by about 200%. Companies are increasingly looking at the black market to pay their financial obligations denominated in Lebanese pound, but some loans are still USD-denominated. The combined effect deep recession and significant public debt have resulted in a massive capital flight.

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