While the IMF is calling for new economic and banking reforms in Lebanon, many households are struggling to meet the cost of living. The implementation of these measures also raises questions. Economist Jassem Ajaka analyzes the risks they pose to the population and the fragilities of the Lebanese economy.

Published on: 01/11/2026 - 11:29

In Lebanon, doing your shopping or simply refueling is becoming more and more expensive. Daily expenses weigh heavily on household budgets. Food prices are rising and travel is becoming more expensive. For many residents, it is becoming difficult to maintain their standard of living in a country already hit by several years of economic crisis.

Since the financial collapse of 2019, many Lebanese have still not been able to recover their savings blocked by banks. The resumption of war in March 2026 has worsened the situation. The fighting has disrupted economic activity and supply circuits, contributing to a further rise in the cost of living.

According to World Bank forecasts, the Lebanese economy is expected to contract by 6.4% over the whole of 2026, while inflation could reach 17.5%.

At the same time, the government is seeking to advance its discussions with the International Monetary Fund (IMF). The institution calls in particular for continued reform of the banking sector and a solution to the problem of blocked deposits. She also calls for restoring public finances and supports an increase in VAT to 12%, approved by the government on February 16, 2026, but which was still not applied in September.

These measures come at a time when households are already struggling to cope with rising prices. Their application and their consequences on purchasing power raise several difficulties. Economist Jassem Ajaka talks to France 24 about the obstacles to reforms and the risks weighing on the Lebanese economy.

Read alsoIn Lebanon, the economic crisis and inflation are hitting homes

France 24: Are the reforms requested by the IMF realistic for Lebanon?

Jassem Ajaka: Continuing discussions with the IMF is essential to enable Lebanon to regain financial stability and restore its international credibility. But the implementation of the reforms faces several major obstacles.

One of them concerns the financial imbalance, estimated between 70 and 80 billion dollars. According to the envisaged reform plan, these losses must be absorbed in a precise order. Without government intervention to bail out the financial system, a significant portion of deposits could be lost.

Other measures remain necessary to restore public finances and replenish the reserves of the Bank of Lebanon. But the State lacks the means to carry out these reforms. The fall in real salaries of civil servants has weakened administrations. Regional conflicts also disrupt business finances, making it difficult to pay their tax obligations.

These reforms remain essential, but their application is hampered by political blockages and the weakness of institutions. The scale of the banking crisis further complicates their implementation.

What consequences can they have on the purchasing power of the Lebanese?

Economic reforms can have negative consequences on household purchasing power, both in the short and long term.

Lebanon relies heavily on imports. When prices rise abroad or supplies are disrupted, products sold in Lebanon become more expensive, even when priced in dollars.

The heavy reliance on cash dollars also reduces price transparency and promotes higher trade margins.

Tax measures can also weigh on households. The adjustment in the exchange rate used to calculate customs duties has already increased the cost of some imported products.

But not all residents are affected in the same way. Civil servants are particularly penalized, because their salaries have not kept pace with the increase in the cost of living. Conversely, people who receive money from abroad in foreign currency generally benefit from better preserved purchasing power.

Does the coexistence of the dollar and the Lebanese pound further weaken the economy?

Massive use of the dollar can help stabilize the economy in the short term. But this situation also creates significant vulnerabilities in the long term.

As the economy operates mainly in dollars, the Bank of Lebanon has much less means to influence interest rates or support banks in difficulty.

This dependence also penalizes Lebanese producers, faced with higher costs than some of their regional competitors. It thus reinforces the country's dependence on imports.

The current system above all accentuates inequalities. People paid in dollars or who receive money from abroad are more protected against the devaluation of the Lebanese pound. On the other hand, those who receive their income in local currency remain much more exposed to rising prices and loss of purchasing power.

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