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International Monetary Fund. Middle East and Central Asia Dept.
This 2019 Article IV Consultation with Lebanon highlights that Lebanon’s economic position continues to be very difficult, with very low growth, high public debt and large twin deficits. While financial stability has been maintained, deposit inflows, critical to finance the budget and external deficits, slowed down during the past year, reducing the authorities’ room for manoeuvre. The new government has taken some important policy steps to start the needed policy adjustment, which could help raise confidence among investors and donors. The highest priority is the implementation of a sustainable fiscal adjustment that will bend down the path of the public debt-to-gross domestic product ratio through a combination of revenue and expenditure measures. This needs to be complemented by structural reforms and concessionally financed investment to raise Lebanon’s growth potential and help external adjustment, as well as policies to build further buffers in Lebanon’s financial sector. Structural reforms should prioritize reforming the electricity sector, removing impediments to and lowering the cost of doing business, as well as improving governance and reducing corruption.
International Monetary Fund. Middle East and Central Asia Dept.
This 2017 Article IV Consultation highlights that Jordan has made significant progress since the 2014 Article IV Consultation but pressing challenges remain. The gradual pick-up in growth from 2010 to 2014 ended in 2015, with real GDP growth decelerating from 2.4 percent in 2015 to 2 percent in 2016. Labor market conditions have remained challenging, particularly for youth and women, with the unemployment rate increasing to 15.8 percent in the second half of 2016. Despite considerable progress and recent improvements, the outlook remains challenging. Real GDP growth is projected to reach 2.3 percent in 2017, while inflation is expected to stabilize at about 2.5 percent by year-end.
International Monetary Fund. Middle East and Central Asia Dept.
This 2016 Article IV Consultation highlights that Lebanon’s economic growth remains subdued. Following a sharp drop in 2011, growth edged upward briefly to 2–3 percent, but has now slowed again. The IMF staff estimates that GDP increased by 1 percent in 2015, and a similar growth rate in 2016 is projected. Lebanon’s traditional growth drivers—tourism, real estate, and construction—have received a significant blow and a strong rebound is unlikely based on current trends. In the absence of a turnaround in confidence, or a resolution of the Syrian conflict, growth is unlikely to return to potential (4 percent) soon.
International Monetary Fund. Middle East and Central Asia Dept.
This Selected Issues paper analyzes the impact of the Syrian crisis on Lebanon’s economy. Output growth in Lebanon has fallen sharply since the onset of the Syrian crisis and is too low to accommodate new job seekers, or to address the needs of Lebanon’s more vulnerable population. Moreover, low growth is taking a toll on public debt dynamics, raising the prospect of higher borrowing costs and constrained social and investment spending—both are much needed to improve the quality of public spending and direct it toward more useful and productive uses. The authorities have presented an ambitious proposal to the international community, which centers on a multiyear effort to stimulate growth and employment through a targeted series of investment initiatives.
International Monetary Fund. Middle East and Central Asia Dept.
KEY ISSUES Context: The economy is being severely tested by the Syria crisis. The refugee influx has reached one quarter of the population, fueling already high unemployment and poverty. The political impasse from the presidential elections—following months of negotiations over a new government—adds to the uncertainty. The economy is meanwhile suffering from a broad-based deterioration, with subdued growth and widening fiscal imbalances. Public debt is on the rise. Progress on structural reforms has been limited. On the positive side, deposit inflows have held up and foreign exchange reserves are sizeable; and security conditions have significantly improved, lifting tourism prospects. Key challenges: There is an urgent need for fiscal adjustment to achieve a sustainable debt reduction, and structural reforms to boost growth and address social inequities. Key policy recommendations: • Fiscal policy. The immediate priority is to stop the fiscal deterioration and return to primary surpluses, to avoid a possible loss of market confidence and put debt on a sustainable path. The consolidation strategy should minimize the impact of a planned salary increase for the public sector; include broad-based and non- distortionary revenue measures; and rebalance expenditure away from electricity transfers toward capital and social spending, to promote inclusive growth. Passing a budget for 2014 would help anchor confidence. Fiscal management should be strengthened and anchored in a medium-term perspective. • Monetary policy. The Banque du Liban (BdL) should continue to maintain high foreign exchange reserves as a buffer and signal of commitment to macro-financial stability. It should gradually withdraw from T-bill auctions, and adopt a strategy to improve its balance sheet over time. • Financial sector. Capital buffers should be strengthened, and the loan classification and restructuring rules and the AML/CFT regime further enhanced. • Structural reforms. Reforms in the electricity sector and the labor market are imperative to address current competitiveness pressures, lay the foundations for higher-productivity growth, and improve social conditions. • Refugee crisis. Lebanon cannot shoulder the costs of the massive inflow of Syrian refugees alone, and international budget support is needed. Strong government commitment to adjustment and reforms—along with a concerted policy framework to deal with the refugee crisis—would bolster credibility and help mobilize support.
International Monetary Fund. Middle East and Central Asia Dept.
This paper focuses on Jordan’s 2014 Article IV Consultation, Third and Fourth Reviews Under the Stand-By Arrangement (SBA), Request for Waivers of Nonobservance of Performance Criterion (PC) and Applicability of PCs. The program is broadly on track and, looking forward, will focus on deep tax reform. All end-2013 targets were met. The central government is expected to meet its end-March 2014 target, but the combined public sector deficit will be missed because of temporary shortfalls in gas delivery from Egypt. International reserves have continued to over-perform through March. The IMF staff supports the completion of the third and fourth reviews.
International Monetary Fund. Middle East and Central Asia Dept.
This paper discusses Jordan’s Second Review Under the Stand-by Arrangement, Request for Waivers of Nonobservance of Performance Criteria (PCs), and Modification of PCs. Program performance is broadly on track. The central bank rebuilt reserves, which are now at a comfortable level and well above what was programmed. The national electricity company’s losses were in line with the program through June, but the end-September PC is estimated to have been missed because a temporary interruption in gas flows required more expensive fuel imports. The IMF staff strongly supports the authorities’ plans to seek higher grants.
International Monetary Fund
On February 24, 2012, the Executive Board approved a partial distribution of the general reserve equivalent to SDR 700 million attributed to part of the gold sales windfall profits to all members in proportion to their quotas.
Mr. Yasser Abdih, Mr. Ralph Chami, Mr. Christian H Ebeke, and Mr. Adolfo Barajas
This paper identifies a remittances channel that transmits exogenous shocks, such as business cycles in remittance-sending countries, to the public finances of remittance-receiving countries. Using panel data for remittance-receiving countries in the Middle East, North Africa, and Central Asia, three types of results emerge. First, remittances appear to be strongly procyclical vis-à-vis sending country income. Second, remittances tend to be spent on consumption of both imported and domestically produced goods, rather than on investment. Third, shocks in the sending countries are transmitted via remittances to the public finances - specifically, tax revenues - of receiving countries. In the case of the 2009 global downturn, this impact was particularly strong for several countries in the Caucasus and Central Asia, whereas in the subsequent recovery in 2010 virtually all receiving countries benefitted from an upturn in remittance-driven tax revenues.
International Monetary Fund
Lebanon is facing a difficult global, regional, and domestic environment simultaneously for the first time in more than a decade. Domestic policies should aim at instilling confidence and tackling key policy challenges, such as preserving macroeconomic stability and paving the way for a more resilient, dynamic, and inclusive economy. The Banque du Liban (BdL) relied on its large foreign reserves build-up during the upswing to intervene forcefully when the Lebanese pound came under pressure from deposit outflows and currency conversions in the wake of the government crisis.