IMF Staff Concludes Visit to Lebanon

An International Monetary Fund (IMF) team led by Mr. Chris Jarvis visited Beirut from December 6 to 13, 2017 to take stock of recent economic and financial developments in Lebanon, assess the economic outlook, and discuss policy priorities.

At the conclusion of the visit, Mr. Jarvis made the following statement:

“Lebanon is emerging from the political crisis of November 2017. There are signs that financial markets appear to be returning to normal. The measures taken by the Banque Du Liban have helped support financial stability. The resumption of the government’s work following the return of Prime Minister Saad Hariri offers an opportunity to address important economic challenges.

“The underlying economic conditions in Lebanon remain difficult. Economic growth continues to be subdued, public debt is projected to reach about 150 percent of GDP in 2017, while the current account deficit stands at about 20 percent of GDP. In addition, Lebanon also continues to bear the economic costs of providing a safe haven for over a million registered Syrian refugees—estimated to be about a quarter of the population.

“To preserve confidence there is an urgent need to place the economy on a sustainable path and halt the rise in public debt. In particular, the reform agenda needs to focus on three areas. First, fiscal policy should be immediately anchored in a fiscal consolidation plan to put debt as a share of GDP on a downward path. This will also reduce the need for high interest rates to attract deposits in the banking system. Second, the BDL should use standard monetary instruments as needed to influence market interest rates, while efforts should continue to strengthen buffers in the banking system in light of the risks carried by the banks. Third, to promote sustainable growth, reforming the electricity sector and addressing governance issues remain priorities.

“The authorities are considering a scaling up of public investment. Any such scaling up must be embedded in a fiscal consolidation plan that ensures debt sustainability. It will also be important that as much as possible of the financing for increased investment be on grant or concessional terms. Domestic financing of public investment should be avoided. There is also a need to contain potential fiscal costs and risks arising from any public-private partnership projects. Lastly, the institutional framework for managing public investments should be strengthened before the envisaged scaling up of public investment.

“My team and I had the privilege of meeting with President Michel Aoun, Prime Minister Saad Hariri, Central Bank Governor Riad Salamé, Minister of Finance Ali Hassan Khalil, Director General of Finance Alain Bifani, and Minister of State for Displaced Affairs Mouein Merehbi. We also benefited from meetings with officials of the Ministry of Finance and the Banque Du Liban (BDL), representatives of Parliament, civil society, the private sector, and the international community.

“We would like to express our gratitude to the Lebanese authorities for their hospitality. We look forward to continued dialogue with the authorities. The next Article IV consultation mission is expected to take place in the first quarter of 2018.”