On 15 September 2023 the IMF issued a report following consultations with Lebanon under Article IV of the IMF’s articles of agreement.

The IMF considers that the lack of action on reforms has caused problems for Lebanon’s economy. The country faces economic challenges such as a collapsed banking sector, worsening public services, outdated infrastructure, greater poverty and unemployment. The outlook remains difficult and unstable, and a permanent solution to the problems requires wide ranging policy decisions from the government to contain the external and fiscal deficits and start the restructuring of the banking system and state owned enterprises. The IMF considers that a comprehensive reform program must be implemented.

The seasonal increase in receipts from tourism has increased inflows of foreign exchange during the summer months but this is unlikely to continue and has led to complacency in recent months. The receipts from tourism and remittances are not enough to offset the large trade deficit and the lack of external financing.

A coherent fiscal strategy needs to be implemented to restore debt sustainability and create space for social and infrastructure spending. Improvements to revenue mobilisation are therefore a priority. The government has already collected higher revenues as a result of adopting a more realistic rate for tax base valuation and adjusting the tax schedules and fees to more plausible values. The proposed 2024 budget should therefore ensure consistency with the exchange rate unification process; and should avoid any preferential treatment of some taxpayers over others.

The government should commit resources to rebuilding the tax administration to strengthen tax compliance and increase fairness. The IMF called for implementation of the key elements of the tax policy reform recommendations in their report issued in January 2023 titled Lebanon: 2023 Technical Assistance Report on Putting Tax Policy Back on Track. The report recommended that the favourable tax treatment of capital income should not continue; the potential of property taxation should be exploited; the VAT base should be broadened; more use should be made of excise taxes; and the corporate income tax should be modernised.