Washington/Beirut: Lebanon’s economy continues to face severe pressure amid regional security developments, high inflation, infrastructure damage and significant displacement, according to the latest assessment released by the International Monetary Fund (IMF).

An IMF staff mission visited Beirut from September 15 to 18 to review the country’s economic situation and progress on financial and structural reforms. The assessment said Lebanon has maintained a degree of macroeconomic stability despite exceptionally difficult circumstances, but major challenges remain.

Economy Under Heavy Pressure

The IMF expects Lebanon’s economic activity to contract significantly during 2026. Rising energy costs have contributed to pressure on the country’s external accounts, while inflation remains in double digits.

The economic difficulties have been compounded by damage to infrastructure and housing and the displacement of large numbers of people. These conditions are increasing pressure on government finances and essential public services.

Banking Sector Reform Moves Forward

One important development identified by the IMF is Lebanon’s approval of amendments to its Bank Resolution Law.

The changes are intended to provide a framework for dealing with troubled financial institutions and bring the country’s banking resolution system closer to international practices.

The IMF said further work is required on the Financial Stabilization and Deposits Recovery Law, particularly to establish a framework that protects depositors while maintaining fiscal and financial sustainability.

2027 Budget Faces Major Challenges

Lebanese authorities are working on the country’s 2027 budget, which targets a balanced fiscal position and includes measures intended to improve tax compliance.

However, the IMF has pointed to continuing expenditure pressures, including costs associated with public-sector wages and pensions. It has also encouraged Lebanon to incorporate foreign-financed spending comprehensively into the national budget.

The Fund has stressed the importance of maintaining fiscal discipline while creating room for reconstruction and social protection.

Medium-Term Financial Planning

Another major area of focus is Lebanon’s proposed Medium-Term Fiscal Framework.

Such a framework is intended to provide greater consistency between annual budgets and longer-term fiscal objectives. The IMF said additional work remains necessary on the sequencing of fiscal measures, capital expenditure and social spending.

A credible medium-term framework could help authorities plan reconstruction and public spending while addressing debt and fiscal sustainability challenges.

Energy Costs Add to Economic Strain

Higher energy prices are creating additional difficulties for Lebanon’s economy. Rising energy costs are affecting households, businesses and the country’s external position.

The combination of expensive energy, infrastructure damage and financial-sector problems makes economic recovery particularly challenging.

IMF Continues Engagement With Lebanon

The IMF said it remains committed to working with Lebanese authorities on a comprehensive reform programme that could potentially be supported by an IMF arrangement.

The latest mission therefore represents another stage in discussions over banking-sector restructuring, fiscal management and measures needed to restore economic stability.

Lebanon’s recovery will depend on progress across several areas simultaneously, including financial-sector reform, fiscal planning, reconstruction and social protection.