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IMF urges Lebanon to implement economic reform package

The organisation also painted a bleak economic picture for the region as a whole, slashing growth forecasts
Protestors in Lebanon continue to protest for the tenth consecutive day on Monday (AFP)

The International Monetary Fund (IMF) has urged Lebanon to urgently implement an emergency reform package announced by the government last week in the face of mass protests and a deepening economic crisis.

It comes as the Washington-based organisation painted a bleak economic picture for the region, slashing growth forecasts and arguing that unemployment and sluggish economic growth were fuelling social tensions that had given rise to popular protests which have also gripped Algeria, Sudan and Iraq in recent weeks and months.

The IMF said it was “studying” a package mooted by Prime Minister Saad al-Hariri to appease protesters who have decried corruption and mismanagement of state finances, but also to convince foreign donors it can slash next year’s budget deficit.

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"We're studying it. We need to see not only what is in the package but also the timeline of the package for a country like Lebanon that has such high levels of debt over GDP and high levels of twin [budget and trade] deficits," Jihad Azour, director of the IMF's Middle East and Central Asia department told Reuters.

Protestors gathered for a tenth consecutive day on Monday, and a fall in the value of Lebanese bonds is a sign that Hariri's reforms, which include the halving of the salaries of ministers and MPs, have yet to have their desired effect.

The IMF forecast a fiscal deficit of 9.8 percent of GDP this year, meaning Lebanon has one of the world’s highest levels of government debt as a share of economic output. That number is expected to increase to 11.5 percent next year.

The embattled prime minister said the emergency measures, which also include reform of the energy and telecom sectors, were a start toward achieving the protestors’ demands.

"Fundamental reforms are urgently needed in Lebanon in order to restore macro-economic stability, bring confidence back, stimulate growth and provide some solutions to the issues that were raised by the street," the IMF's Azour said.

Regional unrest

Regional unrest across the Middle East and North Africa, as well as oil price volatility and Brexit uncertainty, were contributing to sluggish growth in the region, the IMF said in a regional outlook report released on Monday. 

It follows the organisation’s grim economic forecast released earlier this month in which 2019 growth across Arab nations and Iran was revised down to a meagre 0.1 percent from 1.1 percent last year.

The risks around the forecast made earlier this month "are skewed to the downside and are highly dependent on global factors", the IMF said, as it also slashed its growth forecasts for the region’s three largest economies - Saudi Arabia, Iran and the United Arab Emirates.

'The level of growth that countries in the region are having is below what is needed to address unemployment'

- Jihad Azour, IMF director for Middle East and Central Asia 

"The level of growth that countries in the region are having is below what is needed to address unemployment," said Azour.

"We are in a region where the rate of unemployment at the youth level exceeds 25-30 percent and this requires growth to be higher by 1-2 percent" in order to make a dent in joblessness, Azour told AFP in an interview.

The IMF also said that US sanctions were hurting Iran’s economy and that the country would need oil price at $194.6 a barrel to balance its budget next year.

At the close of trading on Friday, the price of international benchmark Brent crude was about $62 a barrel.