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BEIRUT, (Reuters) – Lebanon began talks on Wednesday with the International Monetary Fund, with the goal of obtaining nearly 10 billion dollars in aid, urgently needed to pull the country out of the worst financial crisis in its history.
Analysts say difficult negotiations await Lebanon, which is expected to implement economic reforms as long as its leaders avoid it, if Beirut wants to get international assistance.
The first round of talks started via video call due to the general closure imposed in Lebanon by the Corona virus.
“We are satisfied with the atmosphere of these preliminary discussions and we expect that the upcoming discussions will be equally constructive,” Ghazi Wazni, the Lebanese finance minister, said in a statement.
Beirut formally requested assistance from the IMF earlier this month, in what Prime Minister Hassan Diab described as a “crucial moment” for a country facing the greatest threat to its stability since the 1975-1990 civil war.
The talks will be based on a government bailout plan that paints a picture of tens of billions in losses for the financial system.
An international support group, which includes the United States and France, said in a statement that the decision to request a program from the IMF was “a first step in the right direction.”
She added that domestic political support “is necessary for the success of the administration and the speedy completion of negotiations with the IMF,” pointing to the need for consensus between divided Lebanese politicians.
International donors, who previously assisted Lebanon, say they will not consider granting any new assistance before the country implements reforms to deal with widespread corruption and waste, which are the main causes of Lebanon’s economic problems.
“While there are no quick and easy solutions for economic reform, because there will inevitably be losers in the process of reform, it is likely To be arduous, the crisis has become so complex that the need for comprehensive action is urgent and immediate. ”
None of the main parties in Lebanon opposes recourse to the IMF, which is by far the country’s only way to secure support. But some groups, including a party, warn of conditions that may violate the country’s sovereignty.
Lebanon slid into the crisis late last year in light of the depletion of capital flows and protests against the ruling elites due to decades of mismanagement and corruption.
The crisis has devalued the local currency by more than half, and has fueled turmoil as inflation, unemployment and poverty grow.
Banks suffering from a liquidity crisis between depositors and their savings for months, after dollars became more scarce than ever.
After defaulting on its sovereign debt in March, Lebanon hopes that an IMF program will help in talks with its creditors.
Some economists consider the plan a good first step, but they remain skeptical about Lebanon’s ability to implement reforms that involve reducing public sector spending, and reforming the banking sector after years of stagnation and political bickering.
“Certainly we have not yet approached in any way safety, but a coherent, reasonable and coordinated rescue package from the IMF will gradually reassure investors that Lebanon is standing on a more solid land,” Khoman said.
The plan faced a very negative response from the banks, which are expected to bear losses of about $ 83 billion. Banks, one of the government’s largest lenders for decades, have been working on their own plan to conserve some of their capital.