BEIRUT: The International Monetary Fund forecasts Lebanon’s economy will grow by 2 percent in 2014 and a “modest 4 percent over the medium term,” despite two years of violence, political paralysis and a huge refugee influx.
But with heavy pressures weighing on the economy, the IMF also said in a report that Lebanon should “urgently strengthen policies” and its fiscal priority should be to “put public debt on a sustainable downward path”.
Political jockeying and sectarian tensions have slowed or stalled action needed to tackle Lebanon’s financial problems. Public sector wage strikes and widespread power cuts continue in Lebanon, causing further strain on government spending.
Lebanon’s primary budget turned negative in 2012 and deteriorated further in 2013 to 141 percent of GDP as the government came under pressure to spend and economic activity dropped, the IMF report said.
It added that policy decisions, such as a VAT exemption of gasoline and a cost of living adjustment for public sector employees, had also contributed to the rising deficit.
The IMF called for salary scale adjustments to be contained with no retroactive payments, something public sector workers have been calling for in regular protests. The Fund further said the small Mediterranean coastal country was losing competitiveness and should focus on reducing electricity subsidies. “Plans to strengthen generation capacity, switch to natural gas and increase electricity tariffs should be implemented without further delay.” Reuters
