The IMF has called on Lebanon to halt the rise in public debt by increasing tax compliance, lifting fuel taxation and rebalancing spending, including reducing costly electricity transfers.

The statement was made following the visit of an IMF delegation to the country. The fund commended the political progress made in recent months, including the ratification of a new electoral law that paves the way for the first parliamentary elections in eight years to be held in May 2018.

But it said the wide budget deficit remains a source of vulnerability and has led to public debt climbing to 148 per cent of GDP in 2016.

Lebanon in late August passed public sector pay increases, which will further inflate expenditure. Revenue-raising measures designed to offset the impact that were approved at same time were suspended just days later. The proposed increases to VAT and corporation tax had provoked protests earlier in the year.

The IMF said passing a budget – the first in more than a decade – with clear fiscal adjustment measures would send a strong signal of commitment to reduce public debt and boost confidence in the country’s economy.

The IMF expects growth to remain subdued in 2017 at around 2 per cent.

Lebanon key economic indicators
  2010 2011 2012 2013 2014 2015 2016 2017 2018
GDP growth (% change) 8 0.9 2.8 2.5 2 1 1 2 2.5
GDP ($bn) 38.0 40.1 44.1 47.6 49.9 50.8 52.0 53.9 56.3
GDP per capita ($) 8,756 9,144 9,966 10,655 11,058 11,156 11,309 11,616 12,020
General government revenue (Lebanese pound) 12,567 13,769 14,462 14,199 16,398 14,433 14,678 15,260 16,053
General government total expenditure (Lebanese pound) 16,894 17,347 20,059 20,435 20,905 20,066 21,028 22,393 24,219
Current account balance ($bn) -7.9 -6.2 -10.2 -12.7 -14.0 -9.3 -8.3 -8.4 -8.4
Current account balance (% of GDP) -20.7 -15.5 -23.0 -26.7 -28.1 -18.4 -16.0 -15.5 -14.9
Source: IMF