IMF urges Lebanon to make ‘immediate and substantial’ fiscal adjustment

Prime Minister Saad Hariri has promised to reduce the budget deficit as a percentage of GDP by five percent over five years. (AFP)
Updated 22 June 2018
0

IMF urges Lebanon to make ‘immediate and substantial’ fiscal adjustment

  • Lebanon’s debt to GDP ratio is the third largest in the world
  • Donor states and institutions are looking to Lebanon to implement the reforms in order to release billions of dollars worth of financing pledged at a conference in Paris in April

BEIRUT: Lebanon requires “an immediate and substantial” fiscal adjustment to improve the sustainability of public debt that stood at more than 150 percent 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 stabilizes 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 percent 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 toward 3 percent over the medium term.”
Lebanon’s economy has been hit by the war in neighboring Syria. Annual growth rates have fallen to between 1 and 2 percent, from between 8 and 10 percent in the four years before the Syrian war. Two former pillars of the economy, Gulf Arab tourism and high-end real estate, have suffered.
Caretaker Prime Minister Saad Hariri has been designated to form a new government following parliamentary elections last month, Lebanon’s first since 2009, and has stressed the need for the state to see through long-delayed economic reforms.
Donor states and institutions are looking to Lebanon to implement the reforms in order to release billions of dollars worth of financing pledged at a conference in Paris in April. In Paris, Hariri promised to reduce the budget deficit as a percentage of GDP by five percent over five years.
The directors “noted that a well-defined fiscal strategy, including a combination of revenue and spending measures, amounting to about 5 percentage points of GDP, is ambitious but necessary” to stabilize public debt and put it on a declining path over the medium term.
They recommended increasing VAT rates, restraining public wages, and gradually eliminating electricity subsidies. Last year the government spent $1.3 billion subsidizing the state power provider — 13 percent of primary expenditures.


Morocco railway has fastest journey time in Arab world

Updated 5 sec ago
0

Morocco railway has fastest journey time in Arab world

  • Trains will zoom along the newly laid tracks at up to 320kph
  • Morocco puts cost of the project at 23 billion dirhams ($2.4 billion)

TANGIERS: French President Emmanuel Macron arrived in Morocco on Thursday to take part in the inauguration of a high-speed railway line that boasts the fastest journey times in Arab world.
The French leader, who was invited by King Mohammed VI, will attend a grand ceremony at Tangiers' newly renovated train station, with heavy security measures put in place.
The service between Tangiers and Casablanca, via the capital, will slash journey times between the North African country's economic hubs to just over two hours from nearly five.
Trains will zoom along the newly laid tracks at up to 320 kilometers per hour (200 miles per hour).
Morocco has heralded the project as a key step in modernising the country after weathering the Arab Spring uprisings born largely out of discontent over inequality and poor public services.
It wants to position itself as an African hub for foreign investors.
The French presidency hailed the railway line as a "flagship project of the bilateral relationship between France and Morocco."
Macron's one-day working visit "reflects the depth of bilateral relations based on a solid and strong partnership" between the two countries, said the official MAP news agency.
France hopes the high-speed rail project will demonstrate its industrial knowhow so that its companies can secure other contracts in Africa.
"We want to make this project a showcase of the modernisation of the country: It is a challenge that we can take up," the Les Ecos newspaper wrote in an editorial Thursday.
Macron is being accompanied by the heads of French companies involved in the project, including Alstom, which supplied France's famous TGV trains, the Ansaldo-Ineo group, and the Colas Rail-Egis Rail consortium.
The president is visiting Morocco four days after King Mohammed took part in World War I centenary commemorations in France.
Hundreds of workers laboured until the last minute to complete the project, which was launched in September 2011 by then French president Nicolas Sarkozy.
The Moroccan government put the cost of the project at 23 billion dirhams ($2.4 billion), nearly 15 percent more than initial estimates but well below average European prices.
Loans from France helped to cover half of that amount.