Lebanon faces IMF test as new cabinet prioritizes economy, reconstruction

Lebanon's newly formed government won a crucial vote of confidence in parliament on Feb. 26 after Prime Minister Nawaf Salam made a speech vowing to push economic reforms and negotiate a new deal with the International Monetary Fund, a pledge that will soon be tested. 

An IMF delegation is expected in Beirut in March for high-stakes talks, with billions in financial aid hanging in the balance at a critical moment for the war-torn country.

After years of political paralysis and economic collapse, the election of armed forces commander Joseph Aoun as president in January sparked cautious optimism for a national reset. Any revival hinges, however, on regaining access to foreign assistance, which has remained elusive since 2022, when Lebanese officials balked at the reforms required to unlock a $3 billion IMF rescue package.

Pressure to cooperate is now more urgent, as conditions have worsened considerably. According to Lebanese media reports citing leaked World Bank data, Lebanon suffered $14 billion in damage from Israel's war against Hezbollah. Tensions between them escalated in October 2023, when the Lebanese movement declared solidarity with Hamas following the Palestinian group's attack on Israel earlier that month; a year later, Israel invaded Lebanon. The amount of damage from the war was equivalent to roughly 60% of Lebanon's entire gross domestic product in 2023, compounding the already deep crisis dating to 2019, when the country’s financial system began to unravel.