IMF to Review Potential Amendments to Lebanon's Bank Resolution Law

The International Monetary Fund will evaluate any prospective changes to Lebanon's bank resolution law to guarantee they align with international standards, according to a statement made by the multilateral organisation's spokeswoman on Thursday.

Previously, the IMF had welcomed the legislation, which was approved in August, viewing it as a major milestone in efforts to overhaul Lebanon's banking sector restructuring strategy and foster economic recovery. The nation's economic crisis has been further compounded by the ongoing conflict with Israel.

The legislation is designed to reform the banking sector and enable depositors who have been locked out of their savings to gradually regain access to their funds. However, implementation may face delays after Lebanese President Joseph Aoun appealed to the Constitutional Council regarding a specific amendment tied to the central bank's independence and authority.

“The IMF's view is that the bank resolution law that was approved by Parliament is consistent with international standards, which for us is a critical criteria,” stated IMF communications director Julie Kozack.

“We do understand now that the law was referred to the Constitutional Council by the President, and so as that process plays out, and if any changes are made to the law through this review process, we will assess any changes for consistency with international standards, and we would then provide any new advice to the authorities accordingly.”

This law remains a vital pillar as Lebanon works toward securing a new staff-level agreement with the IMF. The government initially signed an agreement with the IMF in 2022 following the collapse of the country's economy driven by years of corruption and mismanagement, though implementation was initially sluggish.

Ms Kozack noted that additional requirements for achieving a staff-level agreement involve an appropriate financial gap law that meets international standards, a 2027 budget, a medium-term fiscal framework, and wider governance and financial management reforms.

President Aoun's legal challenge followed a meeting in Washington on Tuesday, where IMF Managing Director hosted Lebanese Prime Minister Nawaf Salam at the fund's headquarters. Ms Georgieva expressed the fund's continued readiness to support Lebanon's development and the execution of its economic reform agenda.

“I congratulated him on recent reform progress, including the approval of amendments to the Bank Resolution Law, which advanced us towards a new fund programme,” Ms Georgieva shared in a social media post on Tuesday.

During their discussions, Ms Georgieva and Mr Salam also evaluated how Lebanon has managed to sustain a degree of macroeconomic stability despite exceptionally severe circumstances, according to Ms Kozack.

Meanwhile, an August report from the World Bank cautioned that renewed conflict in Israel has derailed Lebanon's fragile economic recovery. The World Bank currently forecasts that Lebanon's economy will contract by 6.4 per cent this year, following a 4.2 per cent expansion in 2025 that marked the fastest growth since the financial crisis began in 2019. Updated economic projections from both the World Bank and IMF are expected later this month.

The Lebanese delegation in Washington also included Finance Minister Yassine Jaber alongside Mr Nawaf. On Monday, the delegation met with US Treasury Secretary Scott Bessent, who underscored the necessity of advancing financial sector reforms to restore confidence in Lebanon's banking system, the Treasury Department reported.