IMF demands Lebanon a primary surplus of 1.7% without additional taxes
The IMF stressed the need for Lebanon to achieve a primary surplus of 1.7% of GDP without imposing any tax increases, while stressing the adoption of a medium-term fiscal plan to address public debt and enhance transparency in the inclusion of expenditures. These conclusions came as a result of the meeting of Finance Minister Yassin Jaber this morning with the regional director of the Fund Ernesto Rigo, in the presence of Resident Representative Frederico Lima and a team from the Fund, along with senior officials of the Ministry of Finance.
The discussion dealt with the draft budget and medium-term financial framework (MTFF) prepared by the ministry, in addition to the repercussions of the decision of the State Consultative Council to stop the customs duty on hydrocarbons. The IMF delegation stressed that achieving financial goals requires parallel reforms in key sectors, especially taxes and customs.
The Ministry's team presented the ongoing reform steps in the Customs Directorate, the Directorates of Imports, TVA and Real Estate Affairs, which will increase revenues and improve the fiscal balance. It was also agreed that the research would be completed at the upcoming fall meetings in Washington to develop a comprehensive financial plan that would enhance confidence and support economic stability.
Since the beginning of its negotiations with Lebanon in 2020, the IMF has set a series of strict reform conditions in exchange for the approval of any financial support program. The most prominent of these conditions is the rebalancing of public finances by achieving a sustainable primary surplus that ensures the gradual reduction of the accumulated deficit, and the reduction of indiscriminate debt that has exacerbated public debt and made Lebanon in an unprecedented state of default.
The Fund is also focusing on a comprehensive restructuring of the banking sector, so that bank losses are addressed and recapitalized to ensure that small depositors are protected first, with shareholders and banking management bearing part of the losses. This requirement is considered one of the most complex negotiating points, as it faces strong political and financial resistance from the parties concerned.
The fund also stresses reforming the electricity sector, which for decades has swallowed billions of dollars from the treasury without providing a stable service. He calls for a clear plan to stop waste and illegal collection, and to increase feeding hours through transparent investments, considering that addressing the electricity file is an essential input to reduce the fiscal deficit and improve the business environment.
At the level of governance, the Fund calls for enhancing transparency and combating corruption through reforming state financial and administrative institutions, updating tax and customs laws to reduce evasion and increase revenues, as well as improving the independence of the judiciary and ensuring the effectiveness of oversight bodies. The Fund believes that progress in these files is a necessary condition to restore the confidence of the international community and investors in Lebanon, and to open the door to any new aid or loans.