Lebanon's IMF Talks Hinge on Who Absorbs the Banking Losses
A preliminary $3 billion agreement has been stalled for more than four years as disputes over banking losses and $83 billion in frozen deposits hold up reforms.
Tariq Benali Tariq Benali covers business and corporate news across the UAE and MENA for Anecdoted, tracking the deals, leadership moves and regulatory shifts behind the region's companies. tariq@anecdoted.com
Lebanon's bid for billions of dollars from the International Monetary Fund remains unresolved. More than four years after a preliminary $3 billion agreement, disputes over banking losses and frozen deposits still block the reforms the Fund demands. Economists say a programme would matter beyond the money: it could restore confidence in the banks, draw international financing and support recovery after nearly seven years of turmoil.
What the IMF requires
IMF spokesperson Julie Kozack said last week that a programme requires the bank resolution law to enter into force, legislation closing the financial gap in line with international standards, a 2027 budget and a medium-term fiscal framework consistent with debt sustainability.
President Joseph Aoun has referred the resolution law to the Constitutional Council, which the IMF had welcomed passing Parliament. The added review has raised concern that further delay could cost Lebanon the assistance.
Four years of stalled talks
- April 2022: A staff-level agreement on a 46-month Extended Fund Facility worth potentially $3 billion, conditioned on prior reforms, approval by IMF management and its Executive Board, and financing assurances from partners.
- September 2023: An IMF mission said urgent reforms went unimplemented, citing weak political will during a presidential vacancy, a paralysed banking sector and triple-digit inflation.
- March 2025: Authorities requested a new programme centred on banking restructuring and a medium-term fiscal strategy, after Aoun's election ended the vacancy.
- April 2026: Talks opened on a separate $800 million to $1 billion arrangement for the budget and the fallout from the regional conflict involving Iran that reached Beirut.
- August 2026: The IMF welcomed Parliament's passage of the banking restructuring law but said financial-gap legislation was still missing.
- October 2026: After the referral, the Fund repeated that the resolution law had to enter into force.
The $83 billion deposit problem
About $83 billion in deposits recorded on Lebanese banks' balance sheets stays trapped, out of reach of households and businesses. Central bank governor Karim Souhaid says emergency measures have repaid roughly $6.3 billion through monthly disbursements and closed about 266,000 small accounts in full.
Analyst Nassib Ghobril said Aoun and Prime Minister Nawaf Salam made an IMF agreement a priority on taking office in 2025, and that banking secrecy amendments, restructuring legislation and a draft medium-term public finance plan have followed, steps the IMF acknowledged on its latest Beirut visit.
The deposit recovery law remains the main obstacle, Ghobril said, because of the liquidity shortage behind repayments. The file touches people's savings and is complicated by populism and political disputes.
In December 2025 the government approved a draft plan to distribute crisis losses and set repayment terms for large and small depositors while pursuing accountability. Renewed Israel-Hezbollah fighting in March 2026 delayed that legislation; the government now expects losses from the escalation that began in 2023 to double to $20 billion.
Ghobril said the draft pledged $22 billion in cash to small depositors, an amount he called unavailable across the central bank and commercial banks combined, with the state unwilling to contribute.
Expert Louis Hobeika argues no IMF agreement and no banking fix is possible without resolving the depositors' crisis. With no consensus on the scale of losses or how to allocate them, he said, the burden should fall on the government, Banque du Liban and commercial banks in proportion to their size, not on depositors, who are the victims.
Hobeika said lost confidence has driven many Lebanese to hold cash outside the banking system. Without healthy banks and public trust in them, he said, there is no economy, investment, growth or consumption.
Ghobril estimates a future programme at $3 billion to $4 billion and says a deal could unlock lending from the World Bank, the European Investment Bank, the European Bank for Reconstruction and Development and others waiting for IMF-backed reform progress before extending concessional loans.
An IMF mission is expected in Beirut after the Fund and World Bank annual meetings later this month, as authorities push the deposit recovery law towards parliamentary approval. Passing it could bring a new staff-level agreement and a roadmap covering public finances, debt sustainability, governance, banking restructuring and a timetable for repaying deposits.
Ghobril cautioned that the road is long, with political uncertainty and the risk of renewed conflict weighing on the outlook. He called the situation neither normal nor stable, citing an armed force operating outside state control and escalating tensions with Israel in the south, factors the Fund takes into account.
For Lebanon, an agreement would mean more than financing. It could lay the ground for rebuilding confidence in the banks, but only if the question of who carries the losses is settled.
