Lebanon has been struggling with deepening economic crises in recent years. Furthermore, the policies of international actors have significantly affected the country’s economic and political dynamics. This analysis examines the relations and developments between the re-elected Trump cabinet and the restored Lebanese government after a long hiatus. The analysis will examine the roots of Lebanon’s economic crisis, the roles of institutions such as the IMF and the United States Agency for International Development (USAID), and the implications of the Trump administration’s policies on Lebanon.
Since 2019, Lebanon has been facing an unprecedented economic crisis as a result of years of unsustainable macroeconomic policies, an overvalued exchange rate and the support of a large financial sector, transparency problems, and a lack of structural reforms. Accelerating capital outflows in late 2019 led to a sovereign default in March 2020, which was followed by a deep recession, a dramatic decline in the value of the Lebanese currency, and triple-digit inflation. The crisis was further exacerbated by the COVID-19 pandemic and the Beirut port explosion in August 2020 (IMF, 2022)
At this point, the IMF has offered a support package of approximately $3 billion in 2022 under a 46-month extended funding arrangement to restructure the Lebanese economy. In order for this agreement to come into effect, the IMF has requested Lebanon to implement a series of reforms. These reforms include restructuring the financial sector, ensuring fiscal discipline, increasing the efficiency of public enterprises, combating corruption, increasing transparency, and establishing a reliable monetary and exchange rate system (IMF, 2022). Although the Lebanese and IMF talks seemingly promise many benefits, no effective economic management has been implemented to date because they have not been put into practice. One of the most important factors in the failure of the agreement is the resistance of the political and financial elites in the country (The Century Foundation, 2023). The elite, who do not want to lose the advantages they have gained from the current system, opposed the reforms that required transparency and accountability demanded by the IMF. In addition, the slow implementation of the reforms has also caused the agreement to fail (The Century Foundation, 2023). Insufficient progress has been made in critical areas such as the restructuring of the banking sector, the fight against corruption, and public finance reforms, which the IMF has presented as preconditions. Chronic political instability and the weakness of the government in Lebanon have also negatively affected this process.
The Lebanese government aims to negotiate a new program with the IMF by 2025. A policy statement approved in February 2025 stated that the government would begin formal talks with the IMF to deal with financial defaults and public debt. This program is expected to include the restructuring of the banking sector and the implementation of reforms necessary for economic recovery (Reuters, 2025). The IMF emphasizes that Lebanon must adopt a comprehensive strategy for economic rehabilitation. Another important development was the appointment of Karim Souaid as the Governor of the Central Bank on March 27, 2025. Souaid, who came to office with the support of President Joseph Aoun, has conveyed the message that he is in favor of reform (AP News, 2025). Souaid succeeded Riad Salame, who has been in the void since 2023, after he was arrested and accused of embezzling public funds (Al-Arabiya, 2025). On the same day, IMF spokesman Kozack stated that Lebanon’s new reform program should focus on restructuring the financial sector and debt sustainability (Aawsat, 2025). Although talks with the IMF are ongoing, local sources are concerned about the IMF’s reforms. For example, another law proposed by the IMF involves the cancellation of banks’ deposits in the Central Bank. In other words, it aims to prevent the collapse of the financial system by temporarily freezing banks’ losses. Authorities warn that this action will lead to a widespread financial collapse and will also wipe out depositors’ funds (Kataeb.org, 2025). In short, the IMF’s demands for reforms require fundamental changes in Lebanon’s economic structure. Implementing the reforms will be a difficult process due to the political and economic balance of power in the country. In addition to the IMF, the U.S. Agency for International Development, or USAID, has contributed to the country’s development efforts by providing infrastructure projects, civil society organizations, and municipalities in Lebanon. The decisions taken by the re-elected Trump administration have directly affected USAID’s activities in Lebanon. Examples of these decisions include the Trump administration’s attempts to close USAID as an independent agency on January 20 and integrate its remaining functions into the State Department. With Elon Musk’s description of USAID as a criminal organization, action has been taken to freeze the activities of an institution that allocates an annual budget of $42.45 billion for international development assistance (Carnegie Endowment, 2025). The Trump administration tends to review and reduce foreign assistance within the framework of its “America First” policy. For this reason, countries dependent on foreign assistance, such as Lebanon, have been extremely negatively affected. The suspension of USAID funds has led to the halting of development projects in Lebanon and the deepening of the economic crisis (New Arab, 2025). Although the US courts ordered the Trump administration to temporarily lift the general freeze on foreign aid on February 13, the damage done to Lebanon is now irreversible (New Arab, 2025). For example, on January 28, a local NGO in Lebanon working in the field of recycling was officially notified to stop its operations, and then in mid-February, the organization’s contract was completely terminated. The NGO’s entire budget — including salaries — was being funded by USAID. The NGO’s president told The New Arab that he immediately cut his own salary to pay his three employees. The freeze on USAID grants has not only affected NGOs, but has also suspended all development programs across all sectors. This sudden suspension of services has had an immediate impact on thousands of beneficiaries, including students whose scholarships were abruptly suspended. Trump has set a 90-day deadline to decide on the institution’s future, with a final decision expected by April 20.
In conclusion, the economic crisis facing Lebanon is an extremely complex problem. The IMF’s demands present an opportunity to rebuild the country’s financial sustainability, but they also demand changes to Lebanon’s deeply entrenched system, which is an extremely difficult task. Meanwhile, the Trump administration’s foreign policy moves, such as the suspension of USAID funding, have deeply affected Lebanon’s development projects and social support networks. The Lebanese government needs to take a careful and balanced approach both in implementing domestic reforms and in securing international funding. If the country is to achieve economic recovery, sustainable development policies must be established and political stability must be prioritized. Political stability is the cornerstone of many reforms.
Works cited
https://www.arabnews.com/node/2590117/middle-east
https://carnegieendowment.org/emissary/2025/02/usaid-trump-foreign-aid-policy-why?lang=en
https://www.arabnews.com/node/2590117/middle-east
https://www.newarab.com/features/why-usaid-freeze-shaking-lebanons-development-sector
https://www.arabnews.com/node/2589354/middle-east
صندوق النقد الدولي: لبنان بحاجة إلى استراتيجية اقتصادية شاملة Aawsat.com
https://tcf.org/content/commentary/how-lebanons-elites-sabotaged-an-imf-rescue/
https://en.kataeb.org/articles/imf-pressures-lebanon-to-reform-banking-secrecy-and-sector-oversight
Compiled by Zahide İlayda Girgin