Lebanon’s new government has the potential to implement critical reforms and unlock more than $12 billion in international financial assistance, provided it is not obstructed by internal political forces, according to Garbis Iradian, Chief Economist for the Middle East and North Africa at the Institute of International Finance.

In an exclusive interview with Nidaa Al-Watan, Iradian outlined two potential scenarios for Lebanon’s economic recovery, emphasizing the urgent need for structural reforms to restore financial stability and attract foreign investment.

Challenges and Reform Prospects

The newly formed government under Prime Minister Nawaf Salam faces three key challenges: ensuring the implementation of a fragile ceasefire with Israel, initiating post-war reconstruction, and executing economic reforms to combat systemic corruption.

Saudi Arabia and other Gulf nations are expected to provide financial assistance, contingent on Lebanon’s commitment to reform. However, with parliamentary elections set for May 2026, the government has a limited timeframe to enact meaningful changes, and entrenched political interests may continue to obstruct reform efforts.

According to Iradian, Lebanon’s economic recovery plan remains broadly aligned with International Monetary Fund (IMF) recommendations. However, key macroeconomic assumptions have evolved over the past four years due to currency depreciation, inflation, and financial sector contractions.

“Without an IMF-backed program, Lebanon will struggle to secure financial aid from the international community, particularly from wealthy Arab states,” Iradian said. “Moreover, absent external pressure, the political elite is unlikely to enact the necessary economic and institutional reforms.”

Iradian identified seven core pillars for Lebanon’s economic recovery:

1. Achieving political stability and security.
2. Restructuring the banking sector and restoring depositor confidence.
3. Implementing a flexible exchange rate and liberalizing foreign exchange controls.
4. Fiscal consolidation through enhanced tax collection and sustainable budgeting.
5. Judicial reforms to strengthen the rule of law and anti-corruption measures.
6. Strengthening social safety nets.

To bridge the gap between reform objectives and political realities, Iradian called for the establishment of an Economic Reform Implementation Committee composed of independent Lebanese experts.

Macroeconomic Projections: Two Scenarios

Iradian outlined two possible economic scenarios for Lebanon:

1. Deep Reform Scenario (50% Probability)

If the government successfully implements structural reforms, Lebanon could secure $12.5 billion in financial aid, including:

• $3 billion from the IMF.
• $3 billion from the World Bank for project financing.
• $4.5 billion from Gulf Cooperation Council (GCC) nations.
• $2 billion from major European donors.

Additionally, the country could attract $10 billion in foreign direct investment (FDI) from GCC countries between 2025 and 2029.

Under this scenario:

• GDP growth would average 6.2% from 2025 to 2029, driven by FDI, public investment, and export expansion.
• Fiscal surplus would increase from 0.4% of GDP in 2024 to 2.5% by 2029 through improved tax collection and economic recovery.
• Current account deficit would decline from 10.5% of GDP in 2024 to 6.6% by 2029, supported by increased exports and tourism revenues.
• Foreign reserves would rise from $10.3 billion in 2024 to $26.4 billion by 2029, driven by capital inflows.
• Public debt would fall from 136% of GDP in 2024 to 53% by 2029 due to fiscal adjustments and debt restructuring.
• Bank deposits would become increasingly accessible over the next five to ten years.

“This scenario offers Lebanon a genuine opportunity for economic revitalization, given its resilient human capital and entrepreneurial spirit,” Iradian said.

2. Limited Reform Scenario (50% Probability)

If key reforms remain stalled due to political obstruction, Lebanon would fail to secure an IMF agreement or major financial aid, leaving it reliant solely on humanitarian assistance.

Under this scenario:

• GDP growth would average 3% from 2025 to 2029, following a 38% economic contraction between 2018 and 2024.
• Exchange rate depreciation and inflation would persist.
• Current account deficit would remain high, and foreign reserves could fall below $7 billion by 2029.
• Bank deposits would remain largely inaccessible.

“Political infighting and resistance from vested interests benefiting from the status quo could derail reform efforts, prolonging Lebanon’s financial and economic crisis,” Iradian warned.