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International Monetary Fund. Middle East and Central Asia Dept.
This Selected Issues paper studies the inefficiencies related to the electricity sector and assesses the potential impact of the 2019 reform plan. Electricity shortages are the second constraint to competitiveness reported by businesses in Lebanon, based on the Enterprise Survey conducted by the World Bank. Lebanon’s electricity sector performance is worse than other similar countries in the region. Many businesses must rely on costly private generators. Income inequalities are exacerbated by both the geographical disparities in Electricité du Liban’s (EdL) electricity provision and its tariff structure. The most vulnerable households are the small consumers located in regions with little electricity provision from EdL. A new electricity plan was approved by Cabinet on April 9, 2019 and ratified by Parliament on April 17, 2019. Although it is critical that the plan is decisively implemented, it is also important that it is enhanced further to fully restore EdL’s viability. Introducing well-targeted measures, such as cash transfers, would help protect the most vulnerable households from the tariff increase. As planned in the reform package, consumer tariffs should be indexed on the evolution of input prices to guarantee that it will not be negatively impacted by future developments in fuel or gas prices.
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. Monetary and Capital Markets Department
This paper discusses findings of the assessment of Lebanon’s financial system. Lebanon has maintained financial stability for the last quarter century during repeated shocks and challenges. Over time, macroeconomic and financial vulnerabilities have accumulated. Although central bank policies have helped to maintain confidence, fiscal adjustment is needed to reduce risks to financial stability. The banking system has thus far proven resilient to domestic shocks and regional turmoil, but the materialization of severe shocks could expose vulnerabilities. Significant progress has been made to further strengthen Lebanon’s financial integrity framework, with some scope for improvement remaining.
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.
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.
The Syrian crisis and the associated inflow of refugees continue to dominate Lebanon’s short-term outlook, compounding long-standing policy weaknesses and vulnerabilities. Political paralysis has set in, with virtually no progress on the structural front. Growth has remained modest and insufficient to make a dent in rising poverty and unemployment. A welcome improvement in the primary fiscal position in 2014 was largely due to temporary factors, and will not be sustained absent adjustment efforts—implying that, without additional effort, Lebanon’s already-sizable public debt burden will only worsen. Financial conditions have nonetheless remained stable, as deposit inflows continue to fund the economy and sizeable buffers support the credibility of the exchange rate peg.
International Monetary Fund. African Dept.
This paper discusses the progress made on Côte d'Ivoire’s National Development Plan (PND) 2012–15. In the area of planning, the 2012–13 PND served to move planning to the forefront of public action. In addition, the National Bureau of Population has been set up to better address the problems of population and development. In the area of justice and human rights, the policy guidance paper has been prepared and is now being implemented. In the area of civil protection, the actions carried out have centered on strengthening the institutional and legal framework for preventing and managing risks and disasters and building up the operational capabilities of bodies in charge of civil protection.
International Monetary Fund. Middle East and Central Asia Dept.
This Selected Issues paper analyzes the various transmission channels of the Syrian crisis—though quantification is hampered by the lack of reliable data—with focus on the impact on fiscal performance and labor markets; it also takes stock of international donor efforts to date. The paper also provides overviews of main effects on Lebanon’s economy, the expenditure pressures associated with the refugee presence, the impact on poverty and inequality, and the added strains on labor markets. A section of the paper describes the response by the international community to help Lebanon cope with the Syrian crisis. Absent additional international support, the needs of both refugees and affected Lebanese communities will not be met. Sound government policies—including implementation of a concerted policy framework to deal with refugee issues and a commitment to fiscal discipline—will send credible signals to donors and help mobilize budget support. Tackling the unprecedented refugee crisis requires strong international support. There has been a large international humanitarian response, but much more is needed.
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.