The unfolding saga surrounding the appointment of a new governor for the Central Bank of Lebanon (BDL) is increasingly dominated by the shadow of the International Monetary Fund (IMF), who has resumed its mission in Beirut and which appears to be the de facto decision-maker in this high-stakes process. While the Council of Ministers is nominally tasked with selecting the next central bank governor, the influence of the IMF has grown inescapable, shaping not only the shortlist of candidates but also the broader economic and political context in which this decision is being made. It seems the IMF holds significant sway in the decision, with two key contenders emerging: Karim Said, a professional lawmaker and banker with a reputation for competence, and Jihad Azour, a figure whose tenure in past administrations was marked by controversies but who now carries the weight of being an IMF fellow. Both candidates represent starkly different visions for the role, and the IMF’s influence underscores the high stakes of this appointment. Lebanon’s current financial crisis has brought the International Monetary Fund (IMF) to the center stage as an unanticipated but dominant force shaping the country’s economic future. In what can only be described as a pivotal moment, the much-anticipated appointment of a new governor for the Banque du Liban (BDL) has become inextricably tied to Lebanon’s relationship with the IMF. This evolving dynamic underscores a stark reality: no reform, recovery, or economic stabilization seems possible without the explicit alignment between the IMF and the incoming central bank governor.
But the financial situation has proved more than opaque. Adding another layer of complexity is the scandal surrounding the Kulluna Irada movement. Known for its advocacy for transparency and reform, the group has now found itself at the epicenter of allegations involving financial misconduct and political collusion. This has struck a nerve in a population already disillusioned by years of unchecked corruption. The revelations highlight the deeply entrenched links between political elites, major banks, and other power players. Depositors who saw their life savings evaporate during the crisis now watch as accusations fly, with no accountability in sight. The scandals have further eroded public trust—not just in political institutions but also in organizations that once positioned themselves as forces for change.
The IMF strikes again.
Last week an IMF staff visit led by mission chief Ernesto Ramirez Rigo, visited Beirut and held discussions with President Joseph Aoun, Prime Minister Nawaf Salam, cabinet officials, and representatives of Banque du Liban. Rigo welcomed the government’s request for a new program, emphasizing the urgent need for a comprehensive economic rehabilitation strategy. He reiterated that Lebanon’s financial sector restructuring is critical to reviving its economy and making its debt sustainable. This unprecedented level of IMF involvement goes beyond the mere selection of the next central bank governor. It sets the tone for Lebanon’s reform agenda, as the success of IMF negotiations—and the accompanying financial support—will depend on the governor’s ability to meet stringent conditions. These include ensuring the independence of the central bank, conducting genuine and transparent audits of financial institutions, and investigating years of financial mismanagement and corruption. Without significant alignment between the new governor’s policies and IMF demands, hopes for meaningful reform will likely remain elusive.
The IMF’s leverage in this scenario cannot be overstated. The institution’s support is seen as essential for stabilizing Lebanon’s economy, securing international aid, and regaining the trust of creditors. Yet, with IMF conditions including strict measures to address corruption, implement transparency, and overhaul financial governance, the appointment of a new BDL governor has become a linchpin issue. Two key contenders have emerged: Karim Said, a seasoned banker and lawmaker with a reputation for professionalism, and Jihad Azour, a figure with a more contentious past in prior administrations but now an IMF fellow with strong ties to the institution. The IMF’s preference—though unofficially expressed—seems poised to heavily influence the outcome, adding another layer of complexity to an already fraught process.
This dynamic underscores a broader reality: the IMF is not merely a passive observer in Lebanon’s financial crisis but an active participant, setting the parameters within which decisions are being made. For the Council of Ministers, the choice of the next governor is not just about filling a vacancy—it is a litmus test of their willingness to align with IMF conditions and demonstrate a commitment to reform. The IMF’s bailout conditions include painful but necessary structural reforms: reducing fiscal deficits, addressing rampant corruption, and ensuring accountability in public spending. However, progress in these talks remains stalled, as Lebanon’s ruling elites resist relinquishing the opaque systems that have long benefitted them. The very figures who should be driving reform are entangled in preserving their own interests, further delaying access to much-needed financial aid. The IMF’s patience, too, is wearing thin, as Lebanon fails to present a unified, credible plan for recovery.
Bondholders strike again
Also on the IMF wish list is the need to find a settlement with Eurobond holders , being an integral player to the reform process. Previously, banking played a pivotal role in Lebanon’s economy, but the future focus remains uncertain. With major banks historically tied to political factions, restructuring is particularly sensitive. Elections set for next year provide momentum to finalize an IMF program and debt restructuring proposals, potentially unlocking financial aid from Saudi Arabia and other bilateral donors. “If the situation normalizes even slightly, the economy could recover quickly,” the adviser noted. Six financial firms—Rothschild, Newstate, Alvarez & Marsal, Houlihan Lokey, GSA, and Centerview—are vying to advise an expanded ad hoc bondholders group, which now includes Greylock, GMO, Morgan Stanley Investment Management, and Neuberger. Law firm White & Case is representing bondholders, while Lazard and Cleary Gottlieb are advising the government.
At the same time, bondholders are signaling that time is running out. The appointment of a financial adviser to facilitate restructuring discussions reflects growing impatience with the lack of progress. Without a credible central bank governor capable of addressing deep-rooted financial mismanagement and engaging constructively with international stakeholders, any hopes of a resolution will remain out of reach.
Lebanon’s US$29 billion in defaulted Eurobonds plummeted to a cash price of six cents on the dollar as the country descended into economic turmoil. Now it seems that the IMF is holding both reigns and forcing itself in Lebanon’s economic life as the only savior in the horizon, or so it seems. The Eurobonds issue is similar to the financial crisis in Lebanon today, a labyrinth of interwoven factors, each fueling the other in a cycle that has brought the country to the edge of collapse. As the Council of Ministers prepares to appoint a new governor for the Banque du Liban (BDL), the nation’s central bank, the process has taken on an air of international intrigue.
Lebanon’s debt-to-GDP ratio was a staggering 178% in 2019, before default, but the World Bank now estimates GDP has declined by 40%, increasing the debt-to-GDP ratio to approximately 300%. This implies significant losses for creditors. Nominal GDP is estimated to range from US$18 billion to US$33 billion, reflecting uncertainty. Meanwhile, the World Bank has pegged reconstruction costs at US$14 billion. A potential advantage is that rampant inflation has considerably diminished the value of domestic government debt held by banks.
What version does the IMF holds
According to Jo Sarrouh, a former international banker and economist, parallel negotiations on bank recapitalization and creditor agreements are anticipated to progress faster than expected. He told a NOWLEBANON interview that restructuring of the BDL estimated US$45 billion shortfall, poses a novel and complex challenge within sovereign debt restructuring frameworks, as the restructuration of the whole banking sector does. Despite these daunting obstacles, progress in talks may provide Lebanon with a pathway to financial recovery. The Usd 3 billion package of financial assistance proposed by the International Monetary Fund (IMF) for Lebanon is conditional on the implementation of critical reforms.
According to Sarrouh, the assistance package hinges on Lebanon’s ability to meet these conditions, signaling a results-oriented approach by the IMF. While the funding would be a lifeline for Lebanon, the government must demonstrate genuine commitment to implementing these reforms. The path is fraught with challenges, including political resistance and socio-economic complexities, raising concerns over the feasibility of timely reform implementation.
Sarrouh stated that the Lebanese side approached the negotiations based on the Lazard plan, which proposed addressing financial losses by writing off a significant portion of deposits. It also outlined a plan to reduce the number of banks through mergers or liquidation, following the audit and evaluation of the 18 largest banks. The Lazard plan further proposed granting five new banking licenses, each requiring a capital investment of $200 million. The plan’s main conclusion emphasized the necessity of a comprehensive restructuring of the banking sector as a foundation for Lebanon’s economic recovery.
Sarrouh noted that this plan, developed by a small group of economists and the Lazard company, lacked serious consultations or coordination with key stakeholders, such as the BDL, the Association of Banks, and the Parliamentary Finance Committee. This oversight led to widespread debate, extending to official and civil entities, and ultimately transformed into a futile argument. Sarrouh believes this doomed the plan from its inception. Matters were further complicated when the government announced the suspension of Eurobond payments in 2021.
Sarrouh noted that the IMF proposal insisted on hedging losses as outlined in the Lazard plan and demanded the adoption of its reform model. This model involved comparing Lebanon to other countries, such as Guatemala, without accounting for Lebanon’s unique circumstances, including the fact that the overwhelming majority of public debt was domestically financed, primarily through Lebanese deposits.
Sarrouh highlighted that under the new administration and government, there appears to be a renewed sense of momentum and a potential opening for alternative pathways. He noted that the inaugural speech and ministerial statement have garnered widespread approval both domestically and internationally, signaling a possible restoration of the trust that had been eroded over time. This shift, he emphasized, could serve as a critical opportunity to address Lebanon’s enduring crises with a fresh and effective approach.
Sarrouh also pointed to recent remarks by the IMF’s managing director, who expressed a willingness to introduce greater flexibility on key issues such as deposit recovery, acceptable loss levels, and meeting specific demands. Reflecting on this, Sarrouh observed that “what was once a condition may now become a prioritized requirement,” indicating a shift in the IMF’s stance that could pave the way for progress.
A revamped agreement outline
Additionally, Sarrouh revealed insights from certain sources suggesting that the IMF is prepared to show flexibility regarding the agreement on public debt levels and the timeline for achieving the required debt-to-GDP ratio. This ratio, potentially set at 80% of national income, could be spread over a number of years to be determined through negotiations. Sarrouh described this target as “acceptable,” particularly in light of expectations that the national economy will begin to grow in the coming year.
Responding to a query regarding the potential timeline for reaching an agreement, Sarrouh proposed a strategic approach that would involve dividing the agreement into two distinct phases. According to Sarrouh, this dual-approach framework could optimize the process and maximize the impact of the efforts aimed at Lebanon’s recovery.
The first phase, he suggested, should focus on a technical agreement. This phase would aim to set the foundation by prioritizing reforms that are urgently needed. These targeted reforms would be designed to align with a clearly defined timeline and specific objectives, addressing critical areas such as governance, public finance transparency, and structural inefficiencies. The technical phase would serve as an immediate response to pressing issues, signaling to both domestic and international stakeholders that Lebanon is committed to initiating meaningful changes.
The second phase, as outlined by Sarrouh, would follow the successful implementation of the technical agreement. This phase would center on a financial agreement, which would build on the groundwork laid in the technical phase. The financial component would integrate the technical reforms into a comprehensive package, designed to secure substantial support from donor countries. Such a package would be critical not only for Lebanon’s economic and financial recovery but also for enhancing the nation’s capacity-building efforts over the long term. Sarrouh emphasized that the technical and financial phases are deeply interconnected, with the success of one contingent on the other.
This two-tiered approach reflects the recognition that international donors and financial institutions require clear evidence of reform commitments before agreeing to provide substantial financial assistance. By implementing technical reforms first, Lebanon would demonstrate its readiness to embrace accountability and transparency, thereby creating a more favorable environment for mobilizing financial resources from donor countries.
Sarrouh’s proposal underscores the importance of strategic sequencing in addressing Lebanon’s multi-faceted economic challenges. The phased approach not only provides a practical roadmap for immediate reforms but also ensures that these reforms are integrated into a sustainable recovery plan, backed by international partnerships. If executed effectively, this strategy has the potential to pave the way for restoring both public trust and international confidence in Lebanon’s ability to recover and rebuild.
A way out?
Ultimately, the appointment of the BDL governor and the ongoing IMF negotiations have become two sides of the same coin. The success of one is entirely dependent on the other, creating a high-stakes situation where failure to align with the IMF’s conditions could deepen Lebanon’s isolation and exacerbate its economic collapse. As the Council of Ministers prepares to make its decision, the world watches closely, knowing that the IMF’s role as an unforeseen kingmaker could very well determine whether Lebanon can emerge from the shadows of crisis or remain mired in uncertainty.
On all counts the stakes are monumental. Without a credible leader at the helm of the central bank, Lebanon lacks the institutional capacity to implement the reforms demanded by the IMF. Without IMF support, the country cannot hope to stabilize its currency or restore confidence in its financial system. And without addressing the scandals that have embroiled its political and financial elite, any reform agenda will be seen as hollow—a mere veneer over a fundamentally broken system.
The investigative question that looms large is whether Lebanon’s ruling class, whose power relies on the very chaos and fragmentation driving the crisis, has any genuine intention to alter the status quo. Are they capable of rising above their sectarian and political interests to prioritize the national good? Or will they continue to navigate these treacherous waters with short-sighted compromises that push the nation further into despair?
Ultimately, this saga is more than a battle over a single position. It represents the intersection of global financial pressures, entrenched local politics, and the urgent need for systemic reform. As Lebanon approaches this critical juncture, the world watches to see whether the country can finally align itself with the demands of accountability, transparency, and sustainability—or whether it will continue to drift further into economic despair.
Maan Barazy is an economist and founder and president of the National Council of Entrepreneurship and Innovation. He tweets @maanbarazy
The views in this story reflect those of the author alone and do not necessarily reflect the beliefs of NOW
