The International Monetary Fund (IMF) said that it is assessing an emergency reform package announced by the Lebanese government last week and stressed that reforms should be implemented urgently given the country’s high debt levels and fiscal deficits.
Jihad Azour, IMF’s Middle East and Central Asia Director, said that Lebanon’s plan to avert a financial crisis is a step in the right direction but more measures are needed to restore growth and confidence.
Prime Minister Saad Hariri presented proposals to almost wipe out Lebanon’s budget deficit next year and reduce wasteful spending—plan was criticized by economists as unrealistic, with Moody’s warning that the reliance on Banque du Liban financing could undermine the country’s currency peg.
The IMF said that the structural reforms proposals were an improvement on the government’s 2020 budget proposals, with more measures to repair strained public finances.
The emergency plan, announced by Prime Minister Hariri, includes the approval of a 2020 budget targeting a deficit of 0.6 per cent of economic output with no other taxes or borrowing and more aid to poorer families.
Azour, a former Lebanese finance minister said that Lebanon needs to do more to bolster slowing economic growth, create jobs and lower one of the world’s highest debt burdens.
Additionally, the reform package promised to impose a one-off tax on bank revenues and cut ministers’ salaries by 50 per cent, as the government tries to unlock around $11 billion in international aid pledges made at a donor conference in Paris 18 months ago—a key to reviving a moribund economy and averting a debt crunch.
Fitch Ratings downgraded Lebanon’s credit ranking into junk as one of the world’s most indebted nations finds its finances stretched with a dwindling flow of cash from abroad
The rating agency downgraded Lebanon for the first time in three years, taking the sovereign down two notches to CCC, while S&P Global affirmed Lebanon’s rating at B-, six steps below investment grade and one level higher than Moody’s.