No ‘low-hanging fruits’ for economic policy reform

Sami Geadah and Marina Chamma
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Lebanon’s new government – now in its third month – has brought a renewed sense of hope that badly needed and long overdue economic policy reforms will be implemented. So far, laws that have passed or been amended – such as the bank secrecy law and bank restructuring – as well as renewed overtures towards the IMF and World Bank during last month’s Spring meetings, bode well for the government’s will and ability for reform.

The reform agenda is immense, covering everything from public finances, monetary and exchange rate policies, the banking system and finding an equitable resolution to depositors, the debt default, state enterprises, the judiciary, and governance. Some of these areas will require concerted efforts over an extended period to bear fruition, which will be beyond the life expectancy of the current government, especially in view of the forthcoming parliamentary elections in 2026.
 
There have been calls to focus on quick wins, or so-called “low-hanging fruits” to get reform going. There is a need to show – to Lebanese citizens and the international community – that business is not as usual, and that the government has the will and capacity to implement reforms that put the country on a sustainable, equitable, and inclusive growth path.
 
This makes practical and political sense for two reasons. First, and as mentioned above, this is likely to be a short-lived government given parliamentary elections, so there is a need to show victories and fast. Second, there is an understanding that any wins would have to overcome political constraints that have stood in the way of reforms for decades on end, since the end of the civil war. Showing concrete wins, no matter how small, would make it clear that the country is finally embarking on serious reforms. However, after decades of stymied reform, chronic corruption, a severe economic and financial crisis, and a war, it is not clear that there are any low-hanging fruits given the entrenched opposition to reforms by vested interests. There must be a focus on fundamental and structural reforms immediately. It almost does not matter what is done first.
 
There is a need to overhaul basic infrastructure – electricity, water, transportation and telecommunications – and a clear plan of action to revamp the public sector and adopt good governance. No viable and productive investments supporting long-term economic growth and job opportunities will come without such basic but necessary changes to begin with.      
 
Lebanon should also – as a matter or priority – update the program that was agreed with IMF staff in 2022 and implement it as soon as practicable. One wouldn’t normally think of an IMF program as a low-hanging fruit, but considerable work has already been done on it, including the revisions to the bank secrecy law, and there is widespread public recognition of its importance. The remaining obstacle seems to be mainly the treatment of depositors and bank owners. While this issue is difficult and quite contentious given the vested interests, it needs to be tackled sooner rather than later, and especially that we are into the fifth year of the crisis. Continuing with the current limbo will be worse than any possible solution to this thorny issue, especially given the essential need for a functioning banking system that can support economic recovery.
 
The current government has the best chance in years to turn around expectations and kickstart genuine and fundamental reforms that are needed for sustainable and inclusive economic growth. If strong and well entrenched vested interests are overcome to implement these reforms, prospects for reforms in other areas may have a good chance as well.

​About the Authors
Sami Geadah is an Associate Fellow at IFI.​
Marina Chamma is a Political Economist and IFI's Communications Manager.