IMF: Lebanon's Reforms Insufficient for Recovery

Lebanese policeman stand outside the parliament building in downtown Beirut, Lebanon October 17, 2017. REUTERS/Mohamed Azakir
Lebanese policeman stand outside the parliament building in downtown Beirut, Lebanon October 17, 2017. REUTERS/Mohamed Azakir
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IMF: Lebanon's Reforms Insufficient for Recovery

Lebanese policeman stand outside the parliament building in downtown Beirut, Lebanon October 17, 2017. REUTERS/Mohamed Azakir
Lebanese policeman stand outside the parliament building in downtown Beirut, Lebanon October 17, 2017. REUTERS/Mohamed Azakir

Lebanon's economic reforms are insufficient to help lift the country out of its economic crisis, the International Monetary Fund (IMF) said on Thursday.

Ernesto Ramirez Rigo, the head of the IMF mission visiting Lebanon, said in a statement that Lebanon's ongoing refugee crisis, fighting with Israel at its Southern border and the spillover from the war in Gaza are exacerbating an already dire economic situation.

Israeli forces and Lebanon's Hezbollah have traded fire across Lebanon's southern border since the war in Gaza broke out in October last year.

The conflict "has internally displaced a significant number of people and caused damage to infrastructure, agriculture, and trade in southern Lebanon. Together with a decline in tourism, the high risks associated with the conflict create significant uncertainty to the economic outlook," Rigo said, Reuters reported.
Fiscal and monetary reforms carried out by Lebanon's finance ministry and the central bank, including steps to unify multiple exchange rates for the Lebanese pound and contain a currency slump, have helped reduce inflationary pressure, according to Rigo.

However, he said more needs to be done if Lebanon is to alleviate its financial crisis.

"These policy measures fall short of what is needed to enable a recovery from the crisis. Bank deposits remain frozen, and the banking sector is unable to provide credit to the economy, as the government and parliament have been unable to find a solution to the banking crisis," he added.

"Addressing the banks' losses while protecting depositors to the maximum extent possible and limiting recourse to scarce public resources in a credible and financially viable manner is indispensable to lay the foundation for economic recovery."

Since Lebanon's economy began to unravel in 2019, its currency has lost around 95% of its value, banks have locked most depositors out of their savings and more than 80% of the population has sunk below the poverty line.

The crisis erupted after decades of profligate spending and corruption among the ruling elite, some of whom led banks that lent heavily to the state.

The government estimates losses in the financial system total more than $70 billion, the majority of which were accrued at the central bank.

 

 

 

 

 



IMF Praises Saudi Arabia’s Unprecedented Economic Transformation

Efforts to diversify the economy have started to bear fruit: IMF (Asharq Al-Awsat)
Efforts to diversify the economy have started to bear fruit: IMF (Asharq Al-Awsat)
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IMF Praises Saudi Arabia’s Unprecedented Economic Transformation

Efforts to diversify the economy have started to bear fruit: IMF (Asharq Al-Awsat)
Efforts to diversify the economy have started to bear fruit: IMF (Asharq Al-Awsat)

The International Monetary Fund (IMF) has praised Saudi Arabia’s significant economic changes under the “Vision 2030” national transformation plan, noting improvements in public finances and business regulations.
An IMF mission expected non-oil growth in Saudi Arabia to reach around 3.5% in 2024, crediting careful economic policies and major reforms.
The mission also highlighted record-low unemployment rates and controlled inflation in the country, and welcomed recent updates to funding requirements aligned with “Vision 2030” goals.
The IMF released a concluding statement at the end of its official staff visit to Saudi Arabia.
In the statement, the IMF said: “Saudi Arabia’s unprecedented economic transformation is progressing well.”
“Prudent macroeconomic policies, transformative changes—including through fiscal reforms and in the regulatory business environment—and strong domestic demand have helped prop up non-oil growth. Inflation remains contained.”
“Spending reprioritization and recalibration of major spending programs are ongoing. Efforts to diversify the economy have started to bear fruit.”
“Building on these successes, it will be important to sustain the non-oil growth momentum, maintain financial sector stability, continue mitigating risks of overheating, reverse declining total factor productivity and ensure inter-generational equity.”
Economic Activity Remains Robust
According to the IMF, real non-oil growth decelerated from 5.3% in 2022 to a still robust 3.8% in 2023, driven mostly by private consumption and non-oil investment.
While non-oil growth for Q1-2024 indicates some moderation in economic activity— the IMF staff estimated that the output gap remains in positive territory, close to 2% of the non-oil potential GDP.
The statement also noted that the Saudi economy weathered the geopolitical tensions in the Middle East well, thanks to minimal trade and financial exposures to the affected regions and uninterrupted shipments.
Unemployment Rate Reached Historic Lows
In 2023, the Saudi economy added over one million jobs, primarily in the private sector. The overall unemployment rate for Saudis dropped to 7.7% in the last quarter of 2023—inching closer to the 2030 Vision objective of 7%.
Labor force participation rates have remained at historically high levels but relatively flat over the past year for both men and women, albeit with the women’s rate still comfortably exceeding the Vision 2030 goal of 30%.
Headline Inflation Has Decelerated Rapidly
After peaking at 3.4% in January 2023, year-on-year inflation receded to 1.6% in April 2024, helped by an appreciating nominal effective exchange rate.
However, rents are growing at a brisk rate of about 10% amid inflows of expatriate workers and large redevelopment plans in Riyadh and Jeddah.
Wholesale prices have also edged up recently, reflecting an increase in input costs. So far, some uptick has been observed in the wages of high-skilled workers.
Additionally, the current account surplus narrowed significantly.
The decline in the current account surplus from 13.7% of GDP in 2022 to 3.2% of GDP in 2023 mainly reflected lower oil exports and strong growth in investment-related imports.
These were partly mitigated by a record surplus in the services balance, including a 38 percent surge in net tourism income.
The Saudi Central Bank’s (SAMA) holding of net foreign assets reached $423.7 billion in April 2024, which was slightly above the end-2023 level.
Reserves remain ample, representing 15.6 months of imports and 208% of the IMF’s reserve adequacy metric by end-2023.