São Paulo – An International Monetary Fund (IMF) staff mission in Lebanon since the 7th has ended this Wednesday (13). The IMF released comments from mission chief Chris Jarvis, who said the country should see subdued growth this year.
Jarvis said there were improvements on the political front with a new electoral law ratified, paving the way for the first parliamentary elections in eight years. However, he points out that Lebanon’s external imbalance “remains very large” and that its wide budget deficit also remains “a source of vulnerability.” Government debt amounted to 148% of GDP in 2016, according to the IMF.
In its latest World Economic Outlook report, the IMF predicted 2% growth for Lebanon this year and 2.5% next year.
Jarvis notes that Lebanon’s economic scenario “remains challenging” and that spillover from regional conflicts, especially in Syria, dominate the near-term outlook. He adds that the small nation is housing over 1 million Syrians, a number equivalent to 25% of its own population. “Lebanon has received international assistance for its efforts and deserves continued support,” the executive said.
He goes on to say that Lebanon’s economy is known for its resiliency, having withstood number of significant shocks, but warns that the widening of public debt must be halted, and that fiscal adjustment is needed for growth to be sustained, through measures including increasing tax compliance and fuel taxation and rebalancing spending, including by reducing costly electricity transfers.
Jarvis advises on structural reforms to boost the business climate, including improving the institutional framework before undertaking large investment projects, as well as assessing the risks and potential fiscal costs arising from any public-private partnership projects. According to him, the passing of a budget with reliable fiscal adjustment measures for the first time in over a decade “would send a strong signal of commitment to reduce public debt and will boost confidence.”
*Translated by Gabriel Pomerancblum
