Lebanon: 2023 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Lebanon

Lebanon’s severe and multifaceted crisis, triggered by sizable deposit outflows and followed by the country’s first ever external public debt default, has been raging for more than three years. It was aggravated by the COVID-19 crisis and the Beirut port explosion in August 2020, but also allowed to persist and deepen by a failure to take much needed policy action, hampered by a lasting political crisis and resistance from vested interests to reforms. The economic and social impact of the crisis has been staggering: output contracted by an estimated 40 percent over 2019–22, the lira lost about 98 percent of its value in the parallel market, triple digit inflation has decimated real incomes, and unemployment and poverty have increased sharply. After three years, the public sector is failing, the provision of public services is almost nonexistent, and the banking sector has collapsed. Informality and the shadow economy have increased sharply.