In its recent country report, the institute said that the fiscal and debt challenges remain outstanding. However, it projected the economy to grow by 7 percent in 2010, similar to the rates achieved in 2009.
IIF mentioned several steps that could be approached by the government t to reduce the debt to GDP ratio. It said that the government may consider raising the VAT tax to 12 percent from 10 percent.
Also, the restructuring of Electricité du Liban will result in a boost in the government’s revenues which should raise its investments in key sectors, mainly the infrastructure and power ones, IIF said.
The institute said that the public debt remains one of the highest in the world with interest payments alone accounting for 11 percent of GDP in 2008.
However, in a positive note, the IIF said that the debt to GDP ratio dropped to 152 percent at the end of October 2009, from 179 percent of GDP in 2006.
The IIF projected a rapid decline in the debt-to-GDP ratio to 124 percent of GDP in 2014 from 152 percent of GDP in 2009, in case consensus is maintained on reform plans.
However it said that in case privatization and reforms are delayed, “then the decline in the debt-to-GDP ratio would be at a slower pace, to reach 138 percent of GDP by the end of 2014.