Lebanon has been facing an economic crisis since 2019 and it is expected to further decline due to political and banking deadlocks, according to Reuters.
Lebanon needs approximately $70 billion to revive the deteriorating economy, but the country’s political situation has made it complicated to receive foreign aid to recover from the crisis.
In April, the International Monetary Fund (IMF) pledged $3 billion over 4 years to help the country reform the economy. However, Lebanese Banks sent a letter in June stating that this agreement is “unlawful” and “unconstitutional”.
On June 23rd, Najib Mikati was re-elected as prime minister and is expected to form a new government to discuss a recovery plan with the IMF for the Lebanese economy.
Last year, Mikati took around 13 months to form a cabinet due to political deadlock.
According to a former member of Lebanon’s IMF negotiations team, Henri Chaoul, “as long as the political governance doesn’t change, nothing will happen.”
Early this week, on June 27th, a team from the New York-based accounting firm, Alvarez and Marsal (A&M), arrived in Lebanon to conduct a forensic audit of Lebanon’s Central Bank (BDL). The audit was ordered by Lebanon’s donor states before they assist the country with funds to recover the economy.
The Lebanese Lira has lost around 90% of its value, and the hyperinflation rate increased by 211% in May. This leaves approximately 80% of the Lebanese population to live below the poverty line.
It is of utmost importance for the prime minister to form a government as soon as possible, and fix the political state of the country to prevent further economic turmoil.
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