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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.
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
In this study, Lebanon’s economy performed well during the global financial crisis. The banking sector has been resilient in the face of the global crisis, thanks to relatively conservative funding and asset structures, and prudent banking regulations and supervision. The need to address the high government debt and to implement growth-enhancing structural reforms is emphasized. To underpin the medium-term fiscal strategy and growth, Executive Directors encouraged the authorities to take the opportunity of the positive economic environment to implement structural reforms.