IMF urges Lebanon to make fiscal adjustment

Lebanon requires “an immediate and substantial” fiscal adjustment to improve the sustainability of public debt that stood at more than 150 per cent of gross domestic product (GDP) at the end of 2017, the IMF executive board said.

An IMF statement released overnight said IMF executive directors agreed with the thrust of a staff appraisal which in February urged Lebanon to immediately anchor its fiscal policy in a consolidation plan that stabilises debt as a share of GDP and then puts it on a clear downward path. Lebanon’s debt to GDP ratio is the third largest in the world.

“Directors stressed that an immediate and substantial fiscal adjustment is essential to improve debt sustainability, which will require strong and sustained political commitment,” the IMF executive board statement said.

It reiterated estimates of low economic growth of 1-1.5 per cent in 2017 and 2018. “The traditional drivers of growth in Lebanon are subdued with real estate and construction weak and a strong rebound is unlikely soon,” it said.

“Going forward, under current policies growth is projected to gradually increase towards 3 per cent over the medium term.” Lebanon’s economy has been hit by the war in neighbouring Syria. Annual growth rates have fallen to between 1 and 2 per cent, from between 8 and 10 per cent in the four years before the Syrian war. Two former pillars of the economy, Gulf Arab tourism and high-end real estate, have suffered.