IMF, Lebanon hold talks on up to $1 billion in rapid financing

The International Monetary Fund and Lebanon are discussing options for providing fast-track assistance to help the country absorb the impact of the Middle East war, according to people familiar with the matter.

The conversations are focused on some type of financing instrument that would give Lebanon access to between $800 million and $1 billion, one of the people said, asking not to be identified because the talks are private. The money would be earmarked for budget support and humanitarian response, the people said.

“IMF staff is closely engaged with the Lebanese authorities, including on key economic crisis management issues to mitigate the impact on the economy,” an IMF spokesperson said.

“Discussions are ongoing on a comprehensive reform program that could be supported by an IMF arrangement.”

A spokesperson from Lebanon’s finance ministry didn’t immediately respond to a request for comment.

The IMF has a tool known as the Rapid Financing Instrument that’s available for countries with urgent balance of payments needs. But Lebanon wouldn’t be able to have direct access to this kind of credit because it’s in default on its debt, one of the people said.

In March 2020, Lebanon defaulted on some $30 billion of international debt – one episode in a series of financial and political crises to hit the country, whose economy has shrunk by about one-third over the past decade, according to IMF figures.

Now it’s deeply embroiled in the regional conflict that began when the US and Israel attacked Iran in February. Israeli forces occupy a swath of southern Lebanon and have carried out bombing raids across the country, saying they target the Hezbollah militia that’s a key ally of Iran.

Lebanon resumed negotiations for a broader financing program with the Washington-based IMF under the US-backed government of Prime Minister Nawaf Salam, who took office early last year. But with the country among the worst-hit by the current Mideast conflict, shorter-term financing is now the main focus of talks.