Bank of America (BoFA) Global Research has recently issued its Lebanon Economic Watch where it tackled the long-awaited formation of a government in Lebanon. In details, BoFA considered that formation of a government following a 13-month vacuum offers the chance to stabilize the economy and to engage in talks with international lenders. However, BoFA pointed out that factors such as a weak historic track record, the looming parliamentary elections and the material influence of the political class dash the hopes of any structural reforms, capping as such the upside potential of Lebanese sovereign instruments. BoFA considered that ministers are politically backed, while pointing out that the appointment of former BDL Executive Director for Financial Operations as Minister of Finance (MOF) could help in unifying BDL’s and MOF’s approach to IMF talks. As per BoFA, the focus on preparing for the impending parliamentary elections could shorten the window for the government to agree on a comprehensive plan with the IMF, yet pointed out that the pace of said discussions may accelerate following the elections. Bank of America expects the government to focus on economic stabilization, managing the subsidy card and tapping international donors. BoFA commented that Lebanon is suffering from a myriad of concurrent crises, namely on the balance of payments, fiscal, debt, banking and humanitarian fronts as reflected by the 20% contraction in real GDP, hyperinflation, drastic depreciation of the local currency, shortages in basic goods, large emigration and severe impoverishment of the local population. In this regard, Bank of America commented that the humanitarian crisis could be alleviated to a certain extent by the recent launching of the subsidy card, with it’s funding over a period of one year being covered by a World Bank loan and Special Drawing Rights from the IMF. On the current account front, BoFA highlighted that the deficit has been contracting, reaching $4.7 billion during the first 9 months of 2020, in comparison with a deficit  $12 billion a year earlier. Always in this regard, Bank of America commented that the lifting of subsidies (estimated at $0.4-$0.5 billion) would reduce the burn of BDL reserves. BoFa pointed out that passing the capital control law, which was sent to the parliament in late July, could kick start reform implementation revealing in this context that some $10.8 billion in deposit outflows occurred between Q3-2019 and Q3-2020. On the financial front, Bank of America revealed that the lirafication of deposits could take years to complete, and that the losses on the BDL balance sheet have dramatically increased since Q3-2019. Finally, on the fiscal front, BoFA commented that the contraction in the fiscal deficit owes to the sharp drop in primary expenditures and in interest payments pertaining on international debt or BDL domestic debt, which outweighed the lower revenue levels.