Lebanon starts talks with the IMF to save the economy; more discussions in the coming days By Reuters

BEIRUT (Reuters) – The International Monetary Fund announced on Wednesday that it has entered into remote talks this week with Lebanon, which is seeking some $ 10 billion in aid to emerge from the worst financial crisis in its history.

Difficult negotiations are expected for Lebanon, which should enact economic reforms that its sectarian leaders have long avoided if Beirut hopes to get international aid, analysts said.

With Lebanon blocked by a coronavirus, the first round of talks began by videoconference.

"The goal is to achieve a comprehensive framework that can help Lebanon cope with the current difficult economic and social conditions and restore sustainability and growth," said an IMF spokesperson on the talks. which started on Monday.

She said discussions will continue in the coming days.

"We are comfortable with the atmosphere of these initial discussions and we hope that the discussions to come will be just as constructive," said Lebanese Finance Minister Ghazi Wazni in a statement.

Beirut officially requested IMF assistance earlier this month in what Prime Minister Hassan Diab called a "historic moment" for a country facing the greatest threat to its stability since the 1975 civil war – 90. (nL8N2CV3V7)

The talks will be based on a government bailout that tracks tens of billions of losses in the financial system.

An international support group that includes the United States and France said in a statement that the decision to request an IMF program was "a first step in the right direction".

Domestic political support was "necessary for successful conduct and the speedy completion of negotiations with the IMF," noted the support group, alluding to the need for consensus among frantic Lebanese politicians.

Foreign donors, who have helped Lebanon in the past, say they will not think about providing new aid until the state adopts reforms to tackle endemic corruption and the causes of Lebanon’s economic problems.

"Although there are no quick and easy solutions to economic reconciliation as there will inevitably be losers in a probably tense reform process, the crisis has become so complex that the need to "radical action now," said Ehsan Khoman, chief of research. from the MENA region. and strategy at MUFG.

None of the major Lebanese parties oppose an appeal to the IMF, widely seen as the only way for the country to gain support. However, some groups, including the powerful Iranian-backed Hezbollah Shiite group, have warned of conditions that would violate the country's sovereignty.

Lebanon went into crisis at the end of last year when capital inflows dried up and protests against the ruling elite broke out during decades of mismanagement and corruption.

The crisis halved the value of the local currency and caused unrest as inflation, unemployment and poverty soared.

Banks with liquidity problems have largely frozen depositors of their savings for months as dollars have become scarce.

After defaulting on its sovereign debt in March, Lebanon hopes that an IMF program will facilitate talks with its creditors.

Some economists see the plan as a good first step, but are skeptical of Lebanon's ability to adopt reforms to cut public sector spending and reform the banking sector after years of shifts and political strife.

"We are certainly not far from the woods yet, but a coherent, credible and coordinated IMF bailout over time will reassure investors that Lebanon is in a more sustainable position," said Khoman.

The plan also met with strong rejection from banks who are expected to suffer losses of around $ 83 billion. The banks, the main lenders of the government for decades, are working on their own plan which aims to preserve part of their capital. (nL8N2CN694)