The main road of Roweissat-Jdeideh, in the northern Metn. (Credit: Philippe Hage Boutros/L’Orient-Le Jour)
BEIRUT — Lebanon’s battered economy could rebound to pre-crisis levels if the country’s leaders implement sweeping reforms, the Institute of International Finance (IIF) said in a new report. The Washington-based association of global financial institutions estimated that such reforms could unlock more than $12.5 billion in international aid, offering a potential path out of the economic meltdown that has gripped Lebanon since late 2019.
The IIF believes the newly formed administration — established after Joseph Aoun’s election as president on Jan. 9 and the subsequent formation of Nawaf Salam’s government — could succeed where its predecessors failed. The aid, intended for reconstructing areas devastated by more than 15 months of war between Hezbollah and Israel and reviving Lebanon’s crippled financial system, would be distributed over several years under the IIF’s most optimistic scenario, which it gives a 50 percent chance of materializing.
According to the report, Gulf Cooperation Council countries could contribute $4.5 billion, the International Monetary Fund $3 billion through an aid program, and the World Bank another $3 billion via various projects. It adds that major European countries would provide the remaining $2 billion.
But, the IIF suggests the benefits could extend further. Once reforms begin, Lebanon could attract up to $10 billion in foreign direct investment between 2025 and 2029. Key sectors such as tourism — hit hard by domestic and regional instability — exports, especially to Saudi Arabia after years of strained ties, and public investments — depleted by the crisis — could all see a revival.
If this optimistic outlook holds, Lebanon’s real GDP could grow at an average rate of 6.2 percent until the end of 2029, a stark turnaround from the 5.7 percent contraction projected by the World Bank in its most recent forecast last December.
Intermediate scenario
The IIF outlines seven critical pillars for Lebanon’s recovery: achieving political stability and restoring security, reforming the judiciary to combat corruption. adopting a flexible, floating exchange rate to rebuild confidence in the Lebanese lira, restructuring fiscal policy, overhauling the banking sector to restore a majority of deposits, and finally, strengthening social protection systems.
However, the IIF also envisions an intermediate scenario — equally likely at 50 percent — in which the Salam government, whose mandate expires after the May 2026 parliamentary elections, fails to achieve the objectives of these seven pillars. Under this outcome, Lebanon’s growth would average at 3 percent between 2025 and 2029.
Despite the country’s turbulent recent history, the IIF notably does not outline a more pessimistic scenario. This apparent confidence reflects the positive momentum following the cease-fire between Israel and Hezbollah and recent political developments.
Signs of renewed investor confidence are already emerging. Lebanese eurobonds — dollar-denominated debt instruments on which the state defaulted in March 2020 — have rallied. After languishing at 6 to 7 cents on the dollar since the crisis began, their value surged last fall and accelerated further following Aoun’s election, which ended a two-year presidential vacuum. As of Tuesday’s close, the bonds were trading at 18.6 cents on the dollar.
This article was originally published in French in L'Orient Le-Jour.
