Beirut: An International Monetary Fund (IMF) mission, led by Ernesto Ramirez Rigo, has commended Lebanese authorities for managing to maintain a degree of macroeconomic stability despite the severe challenges posed by regional conflicts. The mission, which concluded its three-day visit to Beirut from September 15 to 18, 2026, engaged in discussions regarding Lebanon's macroeconomic prospects and the progress made on critical economic and financial reforms.
According to National News Agency - Lebanon, the IMF mission acknowledged the detrimental impacts of the conflict between Hezbollah and Israel, as well as regional security developments, on Lebanon's economy and living conditions. Ernesto Ramirez Rigo highlighted that economic activity is expected to contract significantly in 2026, with inflation remaining in double digits. Additionally, the current account deficit has widened, driven by rising energy costs, and Lebanon has faced significant infrastructure and housing damage alongside large-scale internal displacement.
Despite these challenges, Rigo praised Lebanese authorities for maintaining stability through prudent fiscal and monetary policies. He noted progress in budget management since the experts' previous visit, which marks a step toward a sustainable fiscal position. The mission also welcomed Lebanon's adoption of amendments to the law on bank regulation and resolution, aligning with international best practices and providing a framework for addressing the banking sector crisis.
Building on this progress, discussions focused on aligning the Financial Stability and Deposit Recovery Law with international standards. Fund experts stressed the importance of respecting creditor priority order and ensuring depositors do not bear losses before shareholders and lower-ranking creditors. The restructuring process should result in a sustainable banking sector that maintains overall financial sustainability.
Rigo referred to the recently approved increase in the VAT rate to 12 percent by the Council of Ministers, aimed at funding public sector wage and pension hikes. However, this has not yet been implemented, while associated wage costs pressure future spending. Fund staff urged legislative enactment of this increase, comprehensive incorporation of externally funded expenditures into the 2027 budget, and prioritization of support for internally displaced persons.
The IMF mission also advised against discretionary salary or pension increases without offsetting revenue measures. A comprehensive fiscal framework should guide any such actions. Rigo welcomed the preparation of a medium-term fiscal framework (MTFF), emphasizing its importance in restoring fiscal sustainability and creating fiscal space for reconstruction and social protection spending.
Ernesto Ramirez Rigo concluded by affirming the IMF's commitment to supporting Lebanese authorities in formulating and implementing a comprehensive reform agenda. He expressed gratitude for the close cooperation and constructive engagement between the authorities and the expert team. The discussions will continue actively to gain support through an IMF program.