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Books and Analytical Papers > IMF Staff Country Reports

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Cover IMF Staff Country Reports
Lebanon: Technical Assistance Report-Tax and Customs Administration: An Urgent Need for Intervention
International Monetary Fund. Fiscal Affairs Dept.
This Technical Assistance Report on Lebanon focuses on tax and customs administration’s an urgent need for intervention. Recognizing a downward trajectory, national dialogue on the future of Lebanon’s tax and customs administrations is urgently needed. Inaction and underinvestment to deal with these challenges will forego substantial revenues and prolong the effects of the crisis. Options to help reverse the decline in revenue administration exist, and structural mechanisms for financing reform and modernization need to be explored. An immediate intervention is required to stabilize information technology operations and ensure the continuity of the value added tax and Revenue Directorates’ core operations. Having addressed immediate needs, ‘quick wins’ in tax administration should be pursued while consensus on more substantive reforms is achieved. The report recommends that overreach of the Higher Customs Council beyond administrative policy into operations should cease while work continues to introduce a new organizational structure. The consequence is an inability to readily implement change or effectively manage critical operations.
Keywords:
Tax Administration; Customs Administration; Reform; Modernization; Information Technology; IMF CD project support; CD project; staff remuneration; IMF CD activity; IT staff; IMF Middle East; IMF Economist; Tax administration core functions; Customs administration core functions; Auditing; Value-added tax; Global
Cover IMF Staff Country Reports
Lebanon: 2023 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Lebanon
International Monetary Fund. Middle East and Central Asia Dept.
The 2003 Article IV Consultation highlights that Lebanon has been facing an unprecedented sovereign-banking-currency crisis, which is ongoing for more than three years. Although the economy showed some signs of stabilization in 2022, it remains severely depressed. The stabilization was supported by the expiration of coronavirus disease measures, a rebound in tourism, strong remittances inflows, and a gradual improvement in terms of trade in the second half of the year. The economic outlook is highly uncertain and depends on the authorities’ policy actions. Decisive implementation of a comprehensive economic recovery plan could steadily reduce imbalances and provide a policy anchor that will help restore confidence and facilitate return to growth. The report suggests monetary policy and unification of the exchange rate. The unification of the official exchange rates for current account transactions is critical to restore credibility and external viability. This needs to be supported temporarily by capital and deposit withdrawal restrictions.
Keywords:
IMF governance diagnostic; Lebanese authorities; channeling FX demand; IMF support; market rate; expenditure policy reform; liability positions vis-à-vis nonresident; Exchange rates; Debt sustainability; Commercial banks; Global
Cover IMF Staff Country Reports
Lebanon: Technical Assistance Report on Putting Tax Policy Back on Track
International Monetary Fund. Fiscal Affairs Dept.
This Technical Assistance report identifies tax policy reform options to stop the drain on Lebanon’s tax revenue in the immediate and near terms and to move toward a more efficient, effective, and inclusive tax system in the medium term. Lebanon entered the economic crisis already with one of the world’s most skewed income and wealth distributions toward the affluent. Reversing the downward trend in tax revenue and improving the entire tax policy design are thus critical elements of the overall needed reforms for Lebanon to steer its way out of the crisis and modernize its economy. The analysis emphasizes the need for a holistic view of the tax system to guide reforms and balance the trade-offs, rather than a piecemeal approach with ad hoc uncoordinated measures—and for a strategic, sequenced approach to developing a rapid and powerful emergence from current difficulties. Excises are an efficient way to reduce pollution, generating marked environmental benefits and significant revenue, with a modest impact on prices. In line with international best practices, professionals should be taxed in the real profits’ regime and with the use of withholding taxes on payments to professionals for services.
Keywords:
Tax Reform Crisis and Taxation VAT Efficiency Inequality; VAT revenue; VAT threshold; market rate; authorities of Lebanon; climate commitment; excise revenue; Value-added tax; Income tax systems; Income and capital gains taxes; Excises; Corporate income tax; Global
Cover IMF Staff Country Reports
Lebanon: Selected Issues
International Monetary Fund. Middle East and Central Asia Dept.
This Selected Issues paper studies the inefficiencies related to the electricity sector and assesses the potential impact of the 2019 reform plan. Electricity shortages are the second constraint to competitiveness reported by businesses in Lebanon, based on the Enterprise Survey conducted by the World Bank. Lebanon’s electricity sector performance is worse than other similar countries in the region. Many businesses must rely on costly private generators. Income inequalities are exacerbated by both the geographical disparities in Electricité du Liban’s (EdL) electricity provision and its tariff structure. The most vulnerable households are the small consumers located in regions with little electricity provision from EdL. A new electricity plan was approved by Cabinet on April 9, 2019 and ratified by Parliament on April 17, 2019. Although it is critical that the plan is decisively implemented, it is also important that it is enhanced further to fully restore EdL’s viability. Introducing well-targeted measures, such as cash transfers, would help protect the most vulnerable households from the tariff increase. As planned in the reform package, consumer tariffs should be indexed on the evolution of input prices to guarantee that it will not be negatively impacted by future developments in fuel or gas prices.
Keywords:
ISCR; CR; Electricité du Liban; tariff structure; deficit; cost; electricity provision; generation capacity; EdL's deficit; electricity bill; Electricity; Tariffs; Personal income; Capital spending; Energy sector
Cover IMF Staff Country Reports
Lebanon: 2019 Article IV Consultation-Press Release; Staff Report; Informational Annex; and Statement by the Executive Director for Lebanon
International Monetary Fund. Middle East and Central Asia Dept.
This 2019 Article IV Consultation with Lebanon highlights that Lebanon’s economic position continues to be very difficult, with very low growth, high public debt and large twin deficits. While financial stability has been maintained, deposit inflows, critical to finance the budget and external deficits, slowed down during the past year, reducing the authorities’ room for manoeuvre. The new government has taken some important policy steps to start the needed policy adjustment, which could help raise confidence among investors and donors. The highest priority is the implementation of a sustainable fiscal adjustment that will bend down the path of the public debt-to-gross domestic product ratio through a combination of revenue and expenditure measures. This needs to be complemented by structural reforms and concessionally financed investment to raise Lebanon’s growth potential and help external adjustment, as well as policies to build further buffers in Lebanon’s financial sector. Structural reforms should prioritize reforming the electricity sector, removing impediments to and lowering the cost of doing business, as well as improving governance and reducing corruption.
Keywords:
ISCR; CR; power sector reform agenda; government; government infrastructure; deficit; expenditure measure; budget measure; donor disbursement; staff appraisal; bridge loan; Budget planning and preparation; Electricity; Middle East; Global
Cover IMF Staff Country Reports
Lebanon: 2016 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Lebanon
International Monetary Fund. Middle East and Central Asia Dept.
This 2016 Article IV Consultation highlights that Lebanon’s economic growth remains subdued. Following a sharp drop in 2011, growth edged upward briefly to 2–3 percent, but has now slowed again. The IMF staff estimates that GDP increased by 1 percent in 2015, and a similar growth rate in 2016 is projected. Lebanon’s traditional growth drivers—tourism, real estate, and construction—have received a significant blow and a strong rebound is unlikely based on current trends. In the absence of a turnaround in confidence, or a resolution of the Syrian conflict, growth is unlikely to return to potential (4 percent) soon.
Keywords:
ISCR; CR; Lebanon; government; Lebanese pound; refugee; support refugee; refugee inflow; policymaking framework; borrowing cost; outlook from negative; foreign exchange inflow; bank secrecy; IMF staff estimate; authorities' interest; Lebanon's response; Oil prices; Global; Middle East and Central Asia; Middle East; West Africa; Europe
Cover IMF Staff Country Reports
Lebanon: Financial System Stability Assessment
International Monetary Fund. Monetary and Capital Markets Department
This paper discusses findings of the assessment of Lebanon’s financial system. Lebanon has maintained financial stability for the last quarter century during repeated shocks and challenges. Over time, macroeconomic and financial vulnerabilities have accumulated. Although central bank policies have helped to maintain confidence, fiscal adjustment is needed to reduce risks to financial stability. The banking system has thus far proven resilient to domestic shocks and regional turmoil, but the materialization of severe shocks could expose vulnerabilities. Significant progress has been made to further strengthen Lebanon’s financial integrity framework, with some scope for improvement remaining.
Keywords:
ISCR; CR; interest rate; foreign currency; financial system; bank ownership; bank requests liquidity; bank resolution option; banking sector; bank solvency sensitivity; liquidity position; securities portfolio; bank resolution regime; bank assets; capital planning; stimulus program; bank financing; financial services user; Financial sector stability; Loans; Anti-money laundering and combating the financing of terrorism (AML/CFT); Commercial banks; Global; Middle East; North Africa; East Africa
Cover IMF Staff Country Reports
Lebanon: Selected Issues
International Monetary Fund. Middle East and Central Asia Dept.
This Selected Issues paper analyzes the impact of the Syrian crisis on Lebanon’s economy. Output growth in Lebanon has fallen sharply since the onset of the Syrian crisis and is too low to accommodate new job seekers, or to address the needs of Lebanon’s more vulnerable population. Moreover, low growth is taking a toll on public debt dynamics, raising the prospect of higher borrowing costs and constrained social and investment spending—both are much needed to improve the quality of public spending and direct it toward more useful and productive uses. The authorities have presented an ambitious proposal to the international community, which centers on a multiyear effort to stimulate growth and employment through a targeted series of investment initiatives.
Keywords:
ISCR; CR; Lebanon; GDP; VAT; remittance; capital stock; remittances inflow; investment climate; knowledge economy sector; remittance channel; compliance gap; Value-added tax; Remittances; Labor markets; Tax gap; Global