Press Release No. 08/295

Press Release: IMF Executive Board Approves US$37.6 Million in Emergency Post-Conflict Assistance to Lebanon

November 19, 2008

The Executive Board of the International Monetary Fund (IMF) has approved an amount equivalent to SDR 25.375 million (about US$ 37.6 million) in Emergency Post-Conflict Assistance (EPCA) to Lebanon in support of the authorities' economic program for 2008-09. The amount approved adds to the SDR 50.75 million (about US$ 76.7 million) in Emergency Post-Conflict Assistance provided to Lebanon in April 2007 (see Press Release No. 07/86).

The IMF's support through EPCA is part of a concerted international effort to provide financial assistance to Lebanon. The IMF supported program aims to further reduce the government debt-to-GDP ratio, build up the international reserve buffer, and start implementation of key reforms.

Following the Executive Board's discussion on Lebanon on November 14, Mr. Murilo Portugal, Deputy Managing Director and Acting Chair, stated:

"Following the successful completion of their 2007 economic program, which was supported by an EPCA, the authorities have made further progress toward improving Lebanon's public finances and keeping the debt-to-GDP ratio on a downward path. Despite difficult circumstances, the external position has improved significantly, with a steady increase in international reserves under the fixed exchange rate regime. Moreover, the government has been able to finance its domestic and foreign currency needs largely from the market.

"The impact of the global financial crisis on Lebanon has been limited so far. The effective shielding of the domestic financial sector from exposure to international financial risks, helped by prudent regulation and effective supervision, has contributed to strengthening confidence in the exchange rate peg and the financial system, as reflected by the sustained deposit growth and dedollarization of deposits.

"Despite these important achievements, Lebanon is still facing sizeable vulnerabilities, notably a very high level of public indebtedness and large external financing needs. Lebanon's drawing under a follow-up EPCA is intended to support the authorities' economic and financial policies through June 2009. These policies are geared toward making continued progress on fiscal consolidation by further improving the primary surplus, strengthening further the international reserve buffer, and initiating the privatization of the telecom sector and a broader reform of the energy sector, consistent with the authorities' medium-term economic and reform agenda presented at the Paris III conference in January 2007. The 2008-09 economic program aims at achieving a further reduction of the debt-to-GDP ratio. The policy commitment under the EPCA should help the authorities sustain the financial support of the international community. The timely disbursement of the pledges made at the Paris III Conference is instrumental in furthering these objectives," Mr. Portugal said.