The International Monetary Fund is assessing an emergency economic reform package unveiled by Lebanon's government in response to nation-wide demonstrations over dire economic conditions.
The economic reforms must be implemented quickly, restore confidence and address the structural problems facing Lebanon's economy from job creation to the cost of doing business, Jihad Azour, director of the IMF's Middle East and Central Asia Department, said in an interview in Dubai.
"There are three important things," Mr Azour told The National. "A reform package has to be credible, it has to be implemented very quickly and it has to bring confidence back. Some of the structural issues that the Lebanese economy is facing has to be addressed: mainly the cost of doing business, cost of utilities and some of the problems affecting ability of the economy to create more jobs."
Lebanon has been swept by unprecedented protests for more than 10 days as demonstrators filled streets across the country, shouting slogans, waving banners and raising flags. They are protesting about years of financial mismanagement that has pushed the economy to the brink of collapse. Lebanon is one of the most indebted nations in the world, with a debt-to-gross domestic product ratio of more than 150 per cent.
Last week the government approved a reform package, promising to tax banks and cut officials' pay, in an attempt to avert a financial crisis but it failed to defuse anger.
The emergency plan, announced by Prime Minister Saad Al Hariri on October 21, includes the approval of a 2020 budget targeting a budget deficit of 0.6 per cent of GDP.
Any reforms must preserve stability, stimulate economic growth, create jobs and restructure governance by improving the efficiency of public institutions in key sectors like utilities and telecoms, Mr Azour said.
"Addressing corruption is also important to allow the economy to grow and attract investment," he said.
Lebanon's economic growth is projected to remain flat at 0.2 per cent in 2019, unchanged from last year, and it's "too early" to predict how the ongoing protests may further impact the economy, he said.
Mr Azour said the Fund is still assessing the reforms and how swiftly and credibly the government will implement them.
"I would say they are first steps, again we need to have a look at them and see how the budget is presented to parliament," he said. "Implementation and credibility of implementation are very important."
The IMF's message to the Lebanese authorities during the Fund's annual meetings earlier this month outlined a clear message: the need for a comprehensive reform agenda that restores confidence, addresses the fiscal deficit and provides structural reforms to allow the economy to grow again, Mr Azour said.
The government’s fiscal deficit increased to 11 per cent of gross domestic product in 2018, from 8.6 per cent the year before, and though the 2019 budget targets a deficit of 7.6 per cent, the IMF estimates the deficit will likely be higher.
The Washington-based lender is calling for the reduction of Lebanon's fiscal deficit by decreasing expenditure and maximising revenue through improved tax administration.
"There's a call for immediate action with a comprehensive package that will bring confidence back — confidence of citizens, of the business community, of investors and of the international community that is ready to help Lebanon," he said.
Consumer and investor confidence in Lebanon have sank as the economy systematically decelerated since the outbreak of war in neighbouring Syria in 2011. Lebanon's pound, pegged to the US dollar since 1997, has been under pressure over the past three months as the economic crisis in the country worsened.
