Lebanon’s economic reforms are insufficient to help lift the country out of its economic crisis, the International Monetary Fund said on Thursday. 

Ernesto Ramirez Rigo, the head of the IMF mission visiting Lebanon, said in a statement that Lebanon’s ongoing refugee crisis, fighting with Israel at its Southern border and the spillover from the war in Gaza are exacerbating an already dire economic situation. 

Israeli forces and Lebanon’s Hezbollah have traded fire across Lebanon’s southern border since the war in Gaza broke out in October last year. 

Israel launched its assault on Gaza following a Hamas-led attack on southern Israeli communities on Oct. 7 in which fighters killed 1,200 people and captured more than 250 hostages. 

Since then, Israel’s assault has killed more than 35,000 people, with thousands more feared buried under the rubble, according to Gaza health authorities. 

The conflict “has internally displaced a significant number of people and caused damage to infrastructure, agriculture, and trade in southern Lebanon. Together with a decline in tourism, the high risks associated with the conflict create significant uncertainty to the economic outlook,” Rigo said. 

Fiscal and monetary reforms carried out by Lebanon’s finance ministry and the central bank, including steps to unify multiple exchange rates for the Lebanese pound and contain a currency slump, have helped reduce inflationary pressure, according to Rigo. 

However, he said more needs to be done if Lebanon is to alleviate its financial crisis. 

“These policy measures fall short of what is needed to enable a recovery from the crisis. Bank deposits remain frozen, and the banking sector is unable to provide credit to the economy, as the government and parliament have been unable to find a solution to the banking crisis,” he added. 

“Addressing the banks’ losses while protecting depositors to the maximum extent possible and limiting recourse to scarce public resources in a credible and financially viable manner is indispensable to lay the foundation for economic recovery.” 

Since Lebanon’s economy began to unravel in 2019, its currency has lost around 95 percent of its value, banks have locked most depositors out of their savings and more than 80 percent of the population has sunk below the poverty line. 

The crisis erupted after decades of profligate spending and corruption among the ruling elite, some of whom led banks that lent heavily to the state. 

The government estimates losses in the financial system total more than $70 billion, the majority of which were accrued at the central bank.