Lebanon's financial recovery will rest on security and political reforms, economy minister says

BEIRUT (AP) — Lebanon's moves to remove weapons from all non-state groups and assert full state control are as important as financial reforms if the economy is to recover after years of crisis, the economy minister said Thursday.

“You need economic reforms, but you also need security and political reforms,” Amer Bisat told The Associated Press after a cabinet session in which the Lebanese military reported progress on a plan to disarm Hezbollah and non-state groups and expand deployment in southern Lebanon.

“We’re moving, and we’re moving fairly decisively and clearly in that direction,” he said, adding that asserting full sovereignty to boost investor confidence goes beyond disarmament and military deployment in the south.

“(It) is also the control of the borders, control of the airport, control over smuggling, money-laundering, terrorist activities,” said Bisat.

Lebanon's military said Thursday it has completed the first phase of the plan, though Israel maintains that Hezbollah is still present and rearming in areas the army said it now fully controls.

Israel and Hezbollah’s monthslong war in 2024 battered large swaths of the country and set it back the further economically after years of crisis. The World Bank estimates $11 billion in damages and economic losses from the conflict. The country fell into a protracted financial crisis in 2019 after decades of corruption and mismanagement.

Bisat is a member of Prime Minister Nawaf Salam’s reformist government which was appointed last year with a mandate to reform the country’s banks and make the country’s crippled economy viable again.

For years, the government has stalled on making wide-reaching reforms that could implicate the country’s wide network of cronies. However, western countries and wealthy Gulf Arab monarchies that once poured large sums of money into the country, say that investment and substantial help won’t come without economic and security reforms.

Years of talks with the International Monetary Fund for a bailout have failed to produce a deal.

“We have a credibility gap, we need an international framework to help us solve our problems,” Bisat said. “The days in which people help us without us doing our homework are gone.”

Bisat is among a slim majority of cabinet ministers, alongside Salam, who last month endorsed a draft fiscal gap law to determine the extent of losses — estimated to be tens of billions of dollars — suffered by Lebanese banks during the country’s financial meltdown in 2019 and provide a mechanism to return depositors’ funds that were wiped out at the time. The draft law has been criticized from all sides and it is unclear whether it will be passed by the parliament.

“This is an extremely important piece of legislation, without which this economy just will not be able to take off,” said Bisat, who insisted that the law is not “Biblical” but a framework to start serious discussions. “This problem is extremely complicated financially. The size of the gap is very large.”

Bisat sees economic opportunities globally, especially with Gulf countries that are slowly rebuilding ties with Beirut after previously cutting them to push back against Hezbollah's influence in the country. He also cites regional changes, notably the downfall of the Assad dynasty in Syria, and wealthy Gulf states' appetite in boosting international investments as they diversify their economies, as further incentive for Lebanon to accelerate reforms.

But none of these opportunities will materialize without reforms to restructure the banks and tackle corruption.

“Waiting is not an option. Precisely because time is not our friend,” the minister said.