IMF report recommends
fiscal and financial reforms

Boosting public and private investments is needed

The International Monetary Fund (IMF) has released a report titled ‘Investment and Growth in the Arab World - A Scoping Note’.

The report highlighted the importance of boosting public and private investment to spur economic growth and create new job opportunities. Private investment and foreign direct investment (FDI) in Arab countries was below that of their international peers and failed to significantly fuel economic growth.

The report provided several recommendations for Lebanon. In the fiscal sector, it recommended the restoration of primary fiscal surpluses, to place debt on a downward path and arrest an ever-growing interest burden, increase public investment by shifting the composition of spending and increasing taxes in a fair manner.

To maintain monetary, foreign exchange and financial stability, the dollar peg should continue to support investor confidence and serve the economy well. Reserve buffers should be maintained. The institutional burden on the Central Bank should be reduced, allowing more flexible interest rates and the development of financial markets, according to the report.

Public investment is low by regional and historical standards, and can be accelerated most efficiently by executing the most productive projects from the existing pipeline of projects, for which concessional financing has already been secured. Governance should be improved.

The report called for dealing with the chronic infrastructure deficit, with a particular focus on electricity reform. Passing the framework law for Public Private Partnerships (PPPs) can help mobilize private sector resources for infrastructure investment, with due attention to possible fiscal risks.

The IMF called for the continuation of reforming capital markets and on building on ongoing progress. “The authorities should facilitate the transformation of the Beirut Stock Exchange into a joint-stock company to pave the way for privatization,” stated the report.