Lebanon’s new government has held its first meeting with a call by the president to resume talks with the International Monetary Fund to help kick-start its recovery from one of the world’s worst economic crises in more than a century.
Lebanon’s new Prime Minister Najib Mikati, who took office last week promising to revive IMF talks to unlock aid, said on Monday there was no time to lose and no easy path to tackle one of history’s worst economic meltdowns.
The new government, formed after more than a year of political deadlock, replaced a caretaker administration that had quit following last year’s huge explosion in Beirut.
Mikati told the Cabinet that it would take will, determination and a plan to achieve the hopes of the population.
“It is true that we don’t have a magic wand. The situation is very difficult,” the billionaire-turned-politician said, according to a statement.
The 24-member Cabinet’s most pressing mission during the coming weeks will be to help improve conditions in the country of six million, including a million Syrian refugees.
Lebanese people hope the new administration will finally plot a path out of a crisis that has sunk the currency by some 90 percent since late 2019 and forced three-quarters of the population into poverty.
Mikati pledged to work hard to resolve shortages of fuel and medicine, supplies of which have dried up as the import-dependent nation’s hard currency reserves have run out.
The government will have to manage public anger and tensions resulting from the lifting of fuel subsidies by the end of the month.
Western governments, including the United States and France, have welcomed the cabinet’s formation, while urging it to quickly implement reforms that international lenders have demanded before loans can flow.
“We need the help of the IMF, the World Bank, regional and international funds,” President Michel Aoun, who approved the new government after months of bargaining, told the Cabinet. “What is required are urgent, decisive steps to start reforms.”
Mikati has previously said resuming IMF talks would be a priority. On Friday, he said divisive politics must be put to one side and that he could not go to IMF talks if he faces opposition at home.
In a boost to the government, the finance ministry said Lebanon would receive a total of $1.135bn in IMF Special Drawing Rights (SDRs), more than the $860m that had been expected as part of an IMF general allocation.
In addition to the $860m from 2021, the sum includes $275m dating from 2009, the ministry said, adding the sum would be deposited with the central bank on September 16.
Al Jazeera’s Zeina Khodr reporting from Beirut said that Lebanon, as a shareholder in the IMF, has special drawing rights. The more than $1bn Lebanon has withdrawn is “definitely a lifeline”, but the question is how the government will spend it.
“Will it continue subsidising goods, a policy which has been criticised because it has led to smuggling and importers hoarding fuel and creating a black market?” Khodr said.
“Or will it use this money to support half a million families, vulnerable families who are desperately in need of $100 cash assistance every month?
“The economy has collapsed. More than 80 percent of the population is poor. The currency has collapsed. There are a lot of challenges ahead. But that $1bn – of course it will help – but that is a short term solution. What this government needs to come up with is a sustainable path to recovery,” Khodr said.
Information Minister George Kordahi told reporters after the meeting that Prime Minister Najib Mikati plans to hold intense Cabinet meetings to work on improving matters that “have direct effects on citizens”.
Kordahi quoted Mikati as saying during the meeting that “people are looking for actions and are not concerned anymore about talks and promises.”
IMF talks broke down last year with politicians and banks disputing the scale of vast losses mapped out by a government financial recovery plan which the Fund endorsed. Aoun urged the government to include that financial recovery plan in its policy programme, as well as reforms set out by a French plan last year.
The previous government failed to implement structural reforms which donors have been urging for years, including measures to address state corruption and waste at the root of the crisis.