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Business and Economics > Public Finance

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Cover IMF Staff Country Reports
Lebanon: Technical Assistance Report-Tax and Customs Administration: An Urgent Need for Intervention
International Monetary Fund. Fiscal Affairs Dept.
This Technical Assistance Report on Lebanon focuses on tax and customs administration’s an urgent need for intervention. Recognizing a downward trajectory, national dialogue on the future of Lebanon’s tax and customs administrations is urgently needed. Inaction and underinvestment to deal with these challenges will forego substantial revenues and prolong the effects of the crisis. Options to help reverse the decline in revenue administration exist, and structural mechanisms for financing reform and modernization need to be explored. An immediate intervention is required to stabilize information technology operations and ensure the continuity of the value added tax and Revenue Directorates’ core operations. Having addressed immediate needs, ‘quick wins’ in tax administration should be pursued while consensus on more substantive reforms is achieved. The report recommends that overreach of the Higher Customs Council beyond administrative policy into operations should cease while work continues to introduce a new organizational structure. The consequence is an inability to readily implement change or effectively manage critical operations.
Keywords:
Tax Administration; Customs Administration; Reform; Modernization; Information Technology; IMF CD project support; CD project; staff remuneration; IMF CD activity; IT staff; IMF Middle East; IMF Economist; Tax administration core functions; Customs administration core functions; Auditing; Value-added tax; Global
Cover IMF Staff Country Reports
Lebanon: 2023 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Lebanon
International Monetary Fund. Middle East and Central Asia Dept.
The 2003 Article IV Consultation highlights that Lebanon has been facing an unprecedented sovereign-banking-currency crisis, which is ongoing for more than three years. Although the economy showed some signs of stabilization in 2022, it remains severely depressed. The stabilization was supported by the expiration of coronavirus disease measures, a rebound in tourism, strong remittances inflows, and a gradual improvement in terms of trade in the second half of the year. The economic outlook is highly uncertain and depends on the authorities’ policy actions. Decisive implementation of a comprehensive economic recovery plan could steadily reduce imbalances and provide a policy anchor that will help restore confidence and facilitate return to growth. The report suggests monetary policy and unification of the exchange rate. The unification of the official exchange rates for current account transactions is critical to restore credibility and external viability. This needs to be supported temporarily by capital and deposit withdrawal restrictions.
Keywords:
IMF governance diagnostic; Lebanese authorities; channeling FX demand; IMF support; market rate; expenditure policy reform; liability positions vis-à-vis nonresident; Exchange rates; Debt sustainability; Commercial banks; Global
Cover IMF Working Papers
Debt Dynamics in Emerging and Developing Economies: Is R-G a Red Herring?
Ms. Marialuz Moreno Badia
,
Juliana Gamboa-Arbelaez
, and
Yuan Xiang
In the wake of the COVID-19 pandemic, debt levels in emerging and developing economies have surged raising concerns about fiscal sustainability. Historically, negative interest-growth differentials in these countries have played a debt-stabilizing role. But is this enough to prevent countries from falling into debt distress? Drawing from a sample of 150 emerging and developing economies going back to the 1970s, we find that interest-growth differentials have remained relatively low, dampening debt increases in the run up to a crisis. But in the face of persistent primary deficits, debt service tends to rise abruptly—particularly in emerging markets—and a fiscal crisis ensues. There is also evidence that a large part of the debt build-up around crises stems from valuation effects associated with external debt and the materialization of contingent liabilities. These findings underscore that, though not necessarily a red-herring, low interest-growth differentials cannot fully offset the deleterious effects of large fiscal deficits, forex exposures, or hidden debts.
Keywords:
dampening debt; interest-growth differential; debt build-up; debt-stabilizing role; debt Decomposition; Debt sustainability analysis; Real interest rates; Contingent liabilities; Global
Cover Regional Economic Outlook, April 2021, Middle East and Central Asia
Regional Economic Outlook, April 2021, Middle East and Central Asia
International Monetary Fund. Middle East and Central Asia Dept.

Abstract

A year into the coronavirus (COVID-19) pandemic, the race between vaccine and virus entered a new phase in the Middle East and Central Asia, and the path to recovery in 2021 is expected to be long and divergent. The outlook will vary significantly across countries, depending on the pandemic’s path, vaccine rollouts, underlying fragilities, exposure to tourism and contact-intensive sectors, and policy space and actions. 2021 will be the year of policies that continue saving lives and livelihoods and promote recovery, while balancing the need for debt sustainability and financial resilience. At the same time, policymakers must not lose sight of the transformational challenges to build forward better and accelerate the creation of more inclusive, resilient, sustainable, and green economies. Regional and international cooperation will be key complements to strong domestic policies.

Keywords:
COVID-19; pandemic; recovery; financial crisis; public health; lockdown; social distancing; IMF staff calculation; net bank financing; financing risk; financing constraint; policy space constraint; Oil; Emerging and frontier financial markets; Government debt planning; Oil prices; Middle East and Central Asia; Global; Central Asia and the Caucasus; Middle East; North Africa
Cover IMF Staff Country Reports
Lebanon: 2019 Article IV Consultation-Press Release; Staff Report; Informational Annex; and Statement by the Executive Director for Lebanon
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.
Keywords:
ISCR; CR; power sector reform agenda; government; government infrastructure; deficit; expenditure measure; budget measure; donor disbursement; staff appraisal; bridge loan; Budget planning and preparation; Electricity; Middle East; Global
Cover IMF Staff Country Reports
Lebanon: Selected Issues
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.
Keywords:
ISCR; CR; Electricité du Liban; tariff structure; deficit; cost; electricity provision; generation capacity; EdL's deficit; electricity bill; Electricity; Tariffs; Personal income; Capital spending; Energy sector
Cover Policy Papers
If Not Now, When? Energy Price Reform in Arab Countries; April 2017 Rabat, Morocco
International Monetary Fund
Regulating energy prices has been a common practice around the world. The objective is, generally, to facilitate access to energy products, which are central to people’s well-being and countries’ economic development. However, energy price regulation also leads to wasteful and excessive consumption, discourages investment in the energy sector, and locks in inefficient technologies. Low energy prices also result in subsidies that erode fiscal space, while benefits for the poor are limited. All these effects have been evident in Arab countries, where domestic energy prices are among the lowest in the world. The current environment of low oil prices offers a unique opportunity for change. Lessons from international experience suggest how well thought-out and sequenced reforms can be successful.
Keywords:
PP; price; country; government; price gap; energy price; country authorities; reference price; oil price; Energy pricing; Energy prices; Oil prices; Fuel prices; Energy subsidies; Global
Cover IMF Staff Country Reports
Lebanon: 2016 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Lebanon
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.
Keywords:
ISCR; CR; Lebanon; government; Lebanese pound; refugee; support refugee; refugee inflow; policymaking framework; borrowing cost; outlook from negative; foreign exchange inflow; bank secrecy; IMF staff estimate; authorities' interest; Lebanon's response; Oil prices; Global; Middle East and Central Asia; Middle East; West Africa; Europe
Cover IMF Staff Country Reports
Lebanon: Selected Issues
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.
Keywords:
ISCR; CR; Lebanon; GDP; VAT; remittance; capital stock; remittances inflow; investment climate; knowledge economy sector; remittance channel; compliance gap; Value-added tax; Remittances; Labor markets; Tax gap; Global
Cover IMF Working Papers
Sustainability and Equity Challenges: Some Arithmetic on Lebanon’s Pension System
Mariusz Jarmuzek
and
Najla Nakhle
Reform of Lebanon’s pension system is indispensable. The country already faces fiscal sustainability risks, which will be compounded in the future by significantly higher pensionrelated spending and liabilities, mainly reflecting adverse demographics. In addition to sustainability issues, the pension system also suffers from equity shortcomings—Lebanon is the only MENA country that does not offer social security for retirees in the private sector. While several reform proposals have been formulated since the early 2000s, none has been implemented to date. Costs mount with every year of delay, so action is required soon to address these challenges.
Keywords:
WP; pension; retirement age; pension expenditure; employee; ageing; demographics; equity; pensions; pension reform; fiscal policy; sustainability; private sector scheme; pension payment; pension allowance; present discounted value; pension liability; pension equivalent; private sector employee; pension dynamics; Pension spending; Retirement; Aging; Middle East; North Africa; East Africa