The local economy is expected to grow by two percent in 2014 and four percent over the medium term, according to a forecast by International Monetary Fund (IMF) following a two-week delegation visit to the country.

Raya El Hassan, former Minister of Finance, said: “It is too difficult to set growth expectations for a crucial year that can witness several changes such as presidential and parliamentary elections.”

Growth dropped to 1.5 percent in 2013 from an average of eight percent between 2007 and 2010. El Hassan said that the IMF may have built its estimations on 2013 growth rates. “If a consensual president is elected, the growth rate would exceed two percent, but if elections did not take place, it might be lower.” She said that there are several factors that play a role in GDP growth this year.

The IMF said that the government should strengthen policies to put public debt on a sustainable downward path. “The government should stop inefficient expenditures. Privatization can be adapted through relying on the private sector to finance some sectors,” said El Hassan. She said that privatizing the telecom sector can provide the government with $5 billion and reduce the size of public deficit.

Political jockeying and sectarian tensions have slowed action needed to tackle financial problems. Public sector wage strikes and widespread power cuts continue causing more strain on government spending, the IMF report said.

The primary fiscal balance turned negative in 2012 and declined further in 2013, leading the debt burden to 141 percent of GDP as the government became under pressure to spend and economic activity dropped, said the IMF report.

Policy decisions, such as VAT exemptions on gasoline and the adjustment of the cost of living for public sector employees also contributed to the rising deficit.

The IMF called for the salary scale adjustment to be contained with no retroactive payments and to be distributed over several years. It also said that the country should reduce electricity subsidies. Plans to strengthen the capacity of power generation and increase electricity tariffs should be put in place. “Adjusting the salary scale will increase consumption, but imposing additional taxes will negatively affect the growth rate,” said El Hassan.

The IMF report said that the lack of reforms has amplified macroeconomic imbalances. Therefore it is important to make progress on key structural reforms, according to the report.