The hours drag on as the country waits for the new government to receive a vote of confidence, as if time has come to a standstill. Dozens, if not hundreds, of long-overdue deadlines have suddenly converged, seeking to break free from the stranglehold of collapse and move toward the promise of growth. The hope of seeing reforms materialize is no longer just wishful thinking; it has become a necessity if officials truly intend to save Lebanon and kickstart its reconstruction.

The international community continues to exert pressure on Lebanon to implement financial and economic reforms, a sine qua non condition for accessing international loans and aid. During her recent visit to Beirut, European Commissioner for Neighborhood and Enlargement Dubravka Šuica reaffirmed that "the disbursement of €500 million, out of the €1 billion allocated to Lebanon in 2024 by the European Union, is contingent on the restructuring of the banking sector and an agreement with the International Monetary Fund (IMF)." The same message is echoed by donors, whether they be states or institutions. Since 2018, French envoy Pierre Duquesne, tasked with monitoring the CEDRE conference commitments, has repeatedly urged Lebanese officials to implement these long-overdue reforms.

A Case-by-Case Bank Restructuring

Despite these calls, the chances of failure remain as high as those of success, as highlighted in a recent report by the Institute of International Finance (IIF) titled "New Era: The Urgent Need for Deep Reforms." The key concern is the growing suspicion that decision-makers are attempting to bypass international demands, particularly the restructuring of the financial sector, a cornerstone of any agreement with the IMF.

Lebanon’s new central bank leadership, set to be appointed in June, may choose to address the banking crisis on a case-by-case basis, relying on laws 2/67 and 91/110 rather than pushing for a general restructuring law through Parliament. Such an approach would circumvent one of the IMF’s core conditions: recognizing banks’ deposits at the central bank as irrecoverable debt that must be written off.

This context also intensifies pressure for the utilization of the central bank’s assets—most notably, its gold reserves, estimated at $27 billion, and its foreign currency reserves, amounting to approximately $10.53 billion—to settle banking debts and return depositors’ funds. However, the IMF firmly opposes this strategy, viewing it as a state-funded bailout—a solution it discourages to safeguard its own ability to recoup funds if it enters a program with Lebanon. Instead, the IMF advocates for an internal bailout (bail-in), which involves converting some debts into bank equity and imposing targeted haircuts, while ensuring protections for small depositors. To date, all of Lebanon’s proposed recovery plans have aligned with these IMF principles.

Possible IMF Agreement Scenarios

Beyond the technical hurdles, a report by Bank of America, titled "A Window of Opportunity," suggests that while "Prime Minister Salam’s cohesive and technocratic government presents positive prospects for reforms," it remains subject to an implicit veto power wielded by Hezbollah’s allies. Nevertheless, markets appear to be granting the government a temporary grace period. According to the report, Lebanon’s future is likely to follow one of three scenarios:

1. Stalemate until the parliamentary elections in May 2026, leaving the country trapped in its current crisis.

2. A non-traditional IMF program, allowing greater flexibility in using public funds to absorb banking losses, with support from the international community. This scenario would be less favorable to Eurobond holders than a conventional IMF program, as the state would likely bear a significant portion of the debt incurred during the banking sector’s restructuring. However, if the plan gains international political backing, the IMF might compromise and proceed. Additionally, a revised upward estimate of Lebanon’s nominal GDP—from $18 billion to $25 billion—could provide more room for alternative debt sustainability strategies (Debt Sustainability Analysis - DSA).

3. A conventional IMF program could materialize if technocrats succeed in persuading the broader political class to adopt tough but necessary economic measures. Analysts believe that accelerating the country’s reconstruction efforts could act as an incentive for reluctant political factions to support such an agreement.

Three Key Certainties for the Next Phase

Despite uncertainty regarding the timing and execution of reforms, three factors appear unavoidable:

- An agreement with the IMF is inevitable as a gateway to international aid, though its exact structure remains to be determined.

- The Ministry of Finance, and particularly its minister, will play a central role in proposing financial reforms, whether related to the banking sector, the private sector, or public expenditure management and restructuring of the civil service. Depositors are now seen as the priority, with Bank of America and JP Morgan both asserting that any positive economic decision is more likely to benefit depositors rather than bondholders.

- The banking sector’s financing will depend on the restructuring of Eurobond debt.

Assuming that those who have endured five years of economic collapse can endure a few more months of paralysis before reforms take effect is an illusion. The scale of losses, compounded by the cost of the ongoing crisis, exceeds Lebanon’s ability to recover on its own. And since both the reforms and the IMF agreement are inextricably linked, Lebanon cannot afford to wait until the next parliamentary elections to fulfill its commitments. If delaying reforms over the past years has not ensured economic security, then this time, acting swiftly might not lead to regret—but to salvation.