IMF delegation advises Lebanese officials on economic crisis

An International Monetary Fund delegation has held meetings in Lebanon to give advice on how to tackle the country's crippling economic and financial crisis

BEIRUT -- An International Monetary Fund delegation began meetings Thursday in Lebanon to provide advice on dealing with the country's crippling economic and financial crisis amid concerns the country might default on its Eurobond debt payment for the first time.

Lebanon is going through its worst economic crisis since the 1975-90 civil war. Since then, the country has been marred by widespread corruption and mismanagement in which billions of dollars were spent on infrastructure, which remains mostly dysfunctional.

The IMF experts first held talks in the morning with Prime Minister Hassan Diab, who after the meeting headed to the presidential palace for a Cabinet session. The delegation stayed on at government headquarters for talks with Diab's advisers and left afterward without speaking to journalists.

The meetings come amid concerns that Lebanon might default for the first time on paying back Eurobonds due next month.

The Finance Ministry also released a statement saying it issued invitations to 12 firms to give it financial advice on potential debt restructuring or rescheduling. It said the firms include Citibank, JP Morgan, Standard Chartered and Deutsche Bank.

Information Minister Manal Abdul-Samad quoted Diab as saying in the Cabinet meeting that he hopes the meetings with the IMF will lead to results that “will help the country on the financial, social, economic and living conditions levels.”

“We have started today the first step in solving an accumulation of wrong policies adopted over the past 30 years that led the country to the collapse that we are now living,” Diab said, according to Abdul-Samad.

Diab said public debt has “hemorrhaged state funds” and said corruption and overspending has also emptied state coffers.

Diab became prime minister last month after he received backing from the militant Hezbollah group and its allies three months after Western-backed Prime Minister Saad Hariri resigned following broad protests against the ruling elite.

Earlier this week, IMF Spokesman Gerry Rice said that the team will listen to Lebanese officials' views on how they plan to face the country's economic difficulties and provide “broad technical advice” on policies to deal with the challenges facing the economy.

“Lebanon has not requested financial assistance from the IMF,” Rice said.

Lebanese Finance Minister Ghazi Wazni said in comments released by his office that the IMF delegation will discuss what advice it can give regarding a rescue plan that officials are preparing for the country.

Lebanon has been suffering from slow growth, high unemployment and decades of widespread corruption and mismanagement that have triggering nationwide protests against the political elite since mid-October.

The local currency has lost nearly 60% of its value on the black market. Lebanon also has a massive debt, standing at $87 billion — 150% more than the country's GDP. Amid a severe liquidity crunch, banks have imposed informal capital controls, limiting withdrawals to a few hundred dollars a month. The country's economy has depended heavily on the U.S. dollars since the country's 15-year civil war ended in 1990.

The chairman of the Association of Banks in Lebanon, Salim Sfeir, met President Michel Aoun on Thursday to discuss paying Eurobonds that mature March 9 worth $1.2 billion. Lebanese officials have been discussing whether to pay on time — as they have always done in the past — or default.

Sfeir said after the meeting a solution must be found quickly because the price of Lebanese Eurobonds is dropping on international markets “making Lebanese banks suffer losses and come under increasing pressure.”

OnWednesday, Parliament Speaker Nabih Berri was quoted by a member of his parliamentary bloc as saying that “restructuring the debt is the best solution.”