“Real GDP Growth could exceed eight percent this year,” said Andreas Bauer, the IMF mission chief to Lebanon. “The economy has continued to perform remarkably well and this momentum continued through 2010.”

An IMF delegation has concluded a 12-day visit to Lebanon where it met top officials as part of its annual consultation mission as per Article 4.

Speaking at a joint press conference with Bauer, and the Governor of the Central Bank, Riad Salameh, the Minister of Finance, Raya El Hassan said that the country’s economy has a “golden opportunity” that should be grabbed.

The IMF praised policies of the government and the financial authorities which helped maintain a comfortable financial position and address fiscal vulnerabilities which led to a drop by 30 percentage points in the Debt to GDP ratio from 2006.

The IMF warned however of the high Debt to GDP ratio and other vulnerabilities that still face the economy and said that the government should provide room for more investments and social spending. “Reducing the deficit of Electricite Du Liban is urgent and will require adjusting tariffs, reducing technical and non-technical losses, and improving governance.”

El Hassan said that the government has pledged in the 2010 draft budget to increase investment spending as part of its goal to address structural vulnerabilities of the economy, and stimulate growth.

The draft allocates $2 billion for the budget Ministry of Water and Power, and suggests partnering between private companies and the government to offer financing and launch new power plants to increase power output.

“Public Private Partnerships provide a useful way to address infrastructure bottlenecks. Strong involvement of fiscal authorities must be put in place to avoid fiscal risks,” the IMF said.
 
IMF’s Bauer, said that another measure needed to offer fiscal place, and maintain a high primary surplus, is introducing a package of tax measures, mainly a moderate increase in the VAT tax and the corporate income tax which are considered relatively low by international standards.

Salameh said that the IMF-report voices support to the Central Bank’s policy to keep the value of the lira determined to a fixed exchange rate against the dollar. The report also points out to the high foreign currency reserves that the Central Bank holds which support this goal and assist the bank in keeping control of inflation and prices, Salameh said.