IMF urges strong bank reforms
and an ambitious 2026 Budget

Two contentious points stand in the way of an agreement

The International Monetary Fund (IMF) has called on Lebanon to strengthen its newly passed banking resolution law and adopt a more ambitious 2026 government budget, as the country seeks to stabilize its economy and unlock international financial support.

An IMF mission led by Ernesto Ramirez Rigo concluded a visit to Beirut on Thursday after four days of talks with Lebanese authorities. Discussions focused on banking sector rehabilitation and fiscal policy ahead of the 2026 budget, with further engagement expected during the IMF’s Annual Meetings next month.

A source who met with the IMF mission said that there are still two issues pending. The Central Bank (BDL) has a claim of $16.5 billion (before interest) which the Ministry of Finance (MoF) is not recognizing. The IMF believes that recognizing the claim would torpedo an eventual agreement. The second contention is over the prioritization of assigning losses (the financial gap) at BDL. The government wants to spare all or most depositors.

“Lebanon’s economy shows resilience despite the significant impact of the regional conflict, and is recently experiencing a partial economic rebound on the back of strong diaspora tourism,” Rigo said. He said that authorities had maintained “a tight fiscal and monetary stance,” built up reserves, and preserved a small fiscal surplus.

Steps to establish regulatory authorities in the electricity and telecommunications sectors, as well as moves to digitize tax compliance, were also welcomed.

Still, the IMF warned that structural reforms remain critical. Parliament last month passed a banking resolution law, long viewed as a prerequisite for restructuring the country’s crippled financial system. While describing the move as progress, Rigo said the law “needs further refinement” to meet international standards and ensure effective restructuring. The IMF urged authorities to move forward with a clear strategy to recognize losses, protect small depositors, and restore banking sector viability in line with sustainable public debt.

On fiscal policy, the IMF expressed concern that the Cabinet-approved draft of the 2026 budget lacked sufficient ambition. It acknowledged steps to broaden the tax base and improve compliance but called for deeper reforms to generate fiscal space for reconstruction and social protection. In particular, the IMF highlighted the rollback of fuel excise taxes as a major risk to the government’s revenue capacity.

“All expected expenditure items should be transparently recorded, including those externally financed,” Rigo said, adding that Lebanon needs a medium-term fiscal framework to chart a credible path toward debt sustainability.

Lebanon reached a staff-level agreement with the IMF in 2022 for a $3 billion assistance program, but implementation stalled as authorities failed to enact required reforms. The IMF reiterated on Friday that comprehensive reforms remain essential not only to restore growth but also to mobilize broader international financing.

“The mission looks forward to continuing discussions with the authorities on these issues, including during the upcoming IMF Annual Meetings,” the Fund said.