Thursday 6 July 2023
Last update on Thursday, July 6, 2023 At 10:27 AM
On June 29, the IMF published Article IV on Lebanon, which reports on a very deteriorated macroeconomic situation which poses significant medium and long-term risks to the Lebanese economy and its potential growth, and underlines once again the urgency of adopting reforms.
Two scenarios are considered by the fund:
In the case of a scenario of implementing the reforms as soon as possible, growth could become positive again and restart in 2024, while inflation could be reduced substantially by 2027. The IMF assumes that the restructuring of sovereign debt and the banking sector could be completed in the first half of 2024.
However, this scenario is unlikely until a president is elected and is based on a very uncertain macroeconomic framework.
Conversely, the IMF points out that the prolonged absence of voluntarism will lead to a complete dollarization of the economy. The exchange rate will continue to deteriorate, fueling inflation.
Informality and illicit activities will increase, making it more difficult to collect tax revenue. The Banque du Liban’s reserves will continue to decline, increasing the pressure on the financial system. The emigration of skills and talents out of the country will intensify.
Investments will focus on real estate and the maintenance of existing establishments.
Banks will remain in a state of paralysis and will have very limited lending capacity.
Source Embassy of France in Lebanon
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