At the American Task Force on Lebanon (ATFL), we regularly brief US policymakers and congressional staff on the issues shaping US-Lebanese relations.
As a non-partisan, non-sectarian, and independent organization, we aim to provide fact-based analysis and clear context on the developments that matter most. Through this Explainer series, we break down complex issues into accessible insights for a broader audience.
The structural collapse of the banking sector has forced Lebanon into a parallel cash economy, which now accounts for an estimated 45.7% of the country's GDP. In April 2022, the Lebanese government reached a Staff-Level Agreement (SLA) with the International Monetary Fund (IMF) for a $3 billion Extended Fund Facility. However, accessing these funds requires strict adherence to a framework of prior actions known as IMF conditionality.
Understanding the Core Requirements
IMF conditionality is designed to address the root causes of economic failure rather than merely treating the symptoms. For Lebanon to unlock international financial support, the IMF requires decisive legislative and operational actions across several key sectors:
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- Financial Sector Restructuring: The state must initiate a credible rehabilitation of the banking system. This involves the upfront recognition and distribution of financial losses, the recapitalization of viable institutions, and the protection of small depositors to the maximum extent possible.
- Governance and Accountability: Reforming state governance requires the modernization of the central bank's legal framework and the lifting of outdated banking secrecy laws. Enhancing Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT) standards is mandatory to restore domestic and international confidence.
- Fiscal and Debt Sustainability: Lebanon must approve credible national budgets that align with medium-term revenue mobilization, as repeatedly emphasized in Article IV consultations. This includes unifying the exchange rate for tax and customs valuations and initiating the restructuring of sovereign debt (Eurobonds) to achieve a sustainable debt-to-GDP ratio.
- State-Owned Enterprise (SOE) Reform: Public utilities, particularly Electricité du Liban, must be restructured to reduce the burden on public finances, improve service delivery, and support broader economic recovery.
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The Strategic Outlook
As emphasized in ATFL’s published policy papers, including the 2026 Policy Paper and Recommendations for a Sustainable Bilateral Relationship, securing IMF assistance is not merely a financial necessity; it is critical to addressing Lebanon's monetary, fiscal, and socio-economic collapse. Absent a comprehensive IMF program, Lebanon risks further economic fragmentation as activity increasingly shifts to informal, dollarized transactions that operate beyond state regulatory oversight. This prolonged informality risks deepening systemic inequality and empowering illicit networks.
To ensure long-term stability and prevent the continuous erosion of state institutions, US policy must tie economic recovery to accountable governance, transparency, and strict adherence to the rule of law. Drawing on ATFL’s strategic framework, the path forward requires:
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- Full Implementation: Ensuring that the Lebanese government and parliament complete the required prior actions before any IMF program is approved, while fully implementing the broader economic reform package as a condition for sustained support.
- Sustained US Support: Encouraging US leadership to support Lebanon's work with the IMF on a restructuring plan that establishes credible, lasting reforms to enhance foreign and domestic investments.
- Institutional Accountability: Establishing transparent regulatory agencies, fighting corruption, and reducing patronage networks to renew domestic and international confidence in Lebanon's state institutions.
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Delaying these reforms prolongs the crisis and weakens the state. By fully committing to IMF conditionality, Lebanon can anchor its economic recovery in structured frameworks, thereby reinforcing its state sovereignty and ensuring a stable, prosperous future.