{
  "title": "IMF Survey: Resilient Lebanon Defies Odds In Face of Global Crisis",
  "publication": "IMF News, August 11, 2009",
  "sourceUrl": "https://www.imf.org/en/news/articles/2015/09/28/04/53/socar081109a",
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  "summary": "Last year Lebanon seemed a prime candidate for a textbook emerging market financial crisis. But the Lebanese economy could this year grow substantially faster than recent projections— not the first time the country has defied the odds in the face of a severe shock.",
  "authors": [
    "Harald Finger",
    "Carlo Sdralevich IMF Middle East",
    "Central Asia Department August"
  ],
  "publishDate": "2009-08-11",
  "sections": [
    {
      "heading": "Overview",
      "content": "- In mid-2008 Lebanon seemed a prime candidate for a textbook emerging market financial crisis, but by 2009 the Lebanese economy could grow substantially faster than a recent conservative projection of 4 percent.\n- The country has repeatedly defied severe shocks in recent years, including events in 2005, 2006, 2007–08, and May 2008."
    },
    {
      "heading": "Economic resilience and banking-sector dynamics",
      "content": "- Government debt-to-GDP ratio reported at 160 percent of GDP.\n- Lebanese banks hold the lion’s share of the government’s debt, increasing exposure supported by:\n  - Remarkably stable deposit inflows, mostly from the Lebanese diaspora and foreign investors (typically from the Persian Gulf).\n  - High returns enabled by banks’ portfolio of high-yielding Lebanese government bonds.\n  - Lebanon’s excellent debt service record of no default, even during the civil war of 1975–90.\n- Specific indicators of resilience:\n  - Deposit inflows growing at nearly 20 percent annually.\n  - Central bank international reserves up 60 percent within a year to the equivalent of almost 70 percent of GDP.\n- Crisis episode detail:\n  - Lebanese Eurobond spreads briefly rose to above 1,200 basis points in October 2008."
    },
    {
      "heading": "Liquidity buffers and short-term stabilization",
      "content": "- Banks’ large liquidity buffers allowed them to hold government debt during episodes of deposit withdrawals, averting a full-blown debt crisis.\n- The structural bank–government relationship acts both as a vulnerability (high exposure) and a short-term stabilizer (financing buffer), softening confidence losses compared with typical emerging market debt crises."
    },
    {
      "heading": "Impact of the global crisis and domestic security improvements",
      "content": "- Two additional favorable factors during the global crisis:\n  - A sustained improvement in domestic security conditions following the Doha-brokered peace agreement after May 2008 street fighting, enabling parliament to reconvene and a new government to form.\n  - Lebanon’s small export base at 17 percent of GDP, limiting the impact of the slump in global demand on growth.\n- Other relevant developments:\n  - Tourism industry quick recovery as Arab visitors return despite lower crude oil prices.\n  - Remittances affected by the global downturn, but negative effects small as relatively few expatriates were laid off and returned home from the Gulf.\n  - Bank deposits continued to grow due to attractive interest rates and an improved perception of Lebanese banks relative to Western competitors since the Lehman failure."
    },
    {
      "heading": "IMF partnership and financial assistance",
      "content": "- IMF engagement:\n  - The IMF maintained close policy dialogue, providing policy advice and technical assistance tailored to Lebanon’s needs.\n  - Following the 2006 war, the IMF became part of a concerted international effort to provide financial assistance.\n- Emergency Post-Conflict Assistance (EPCA) provided:\n  - About $37.6 million in EPCA to Lebanon in support of the authorities' economic program for 2008–09.\n  - An additional $76.7 million in EPCA provided in 2007.\n- Lebanon’s IMF-supported program objectives include:\n  - Further reduction of the government debt-to-GDP ratio.\n  - Building up the international reserve buffer.\n  - Implementing key reforms."
    },
    {
      "heading": "The way forward — priorities and policy recommendations",
      "content": "- Top priority: decisive reduction of public debt.\n  - Requires many years of sustained fiscal discipline.\n  - Fixing the electricity sector identified as a perennial drain on the budget.\n- Maintaining the currency peg:\n  - Will be made easier over time by lower fiscal deficits and public debt.\n- Financial stability and banking-sector health:\n  - Safeguard the health of the large banking sector through particularly rigorous supervision to minimize shocks from banks’ portfolios and potential propagation to public debt.\n\nIMF Survey: Resilient Lebanon Defies Odds In Face of Global Crisis\n\n---\n\n\n References\n\n- https://www.imf.org/en/News/country-focus\n- PRESS CENTER\n- IMF Country Focus\n- IMF Board backs Lebanon loan\n- Lebanon and the IMF\n- Post-conflict program report\n- Lebanon economy health check\n- IMF’s Portugal visits Lebanon\n- Emergency Post-Conflict Assistance (EPCA)\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2015/09/28/04/53/socar081109a"
    }
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    "[Markdown version](/en/news/articles/2015/09/28/04/53/socar081109a/index.md)",
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    "Authors: Harald Finger, Carlo Sdralevich IMF Middle East, Central Asia Department August",
    "Published: August 11, 2009",
    "In mid-2008 Lebanon seemed a prime candidate for a textbook emerging market financial crisis, but by 2009 the Lebanese economy could grow substantially faster than a recent conservative projection of 4 percent.",
    "The country has repeatedly defied severe shocks in recent years, including events in 2005, 2006, 2007–08, and May 2008.",
    "Government debt-to-GDP ratio reported at 160 percent of GDP.",
    "Lebanese banks hold the lion’s share of the government’s debt, increasing exposure supported by:",
    "Specific indicators of resilience:",
    "Crisis episode detail:",
    "Banks’ large liquidity buffers allowed them to hold government debt during episodes of deposit withdrawals, averting a full-blown debt crisis.",
    "The structural bank–government relationship acts both as a vulnerability (high exposure) and a short-term stabilizer (financing buffer), softening confidence losses compared with typical emerging market debt crises.",
    "Two additional favorable factors during the global crisis:",
    "Other relevant developments:",
    "IMF engagement:",
    "Emergency Post-Conflict Assistance (EPCA) provided:",
    "Lebanon’s IMF-supported program objectives include:",
    "Top priority: decisive reduction of public debt.",
    "Maintaining the currency peg:",
    "Financial stability and banking-sector health:",
    "[https://www.imf.org/en/News/country-focus](https://www.imf.org/en/News/country-focus)",
    "[PRESS CENTER](http://presscenter.imf.org/)",
    "[IMF Country Focus](https://www.imf.org/en/news/country-focus)",
    "[IMF Board backs Lebanon loan](https://www.imf.org/external/np/sec/pr/2008/pr08295.htm)",
    "[Lebanon and the IMF](https://www.imf.org/external/country/lbn/index.htm)",
    "[Post-conflict program report](https://www.imf.org/external/pubs/cat/longres.cfm?sk=23105.0)",
    "[Lebanon economy health check](https://www.imf.org/external/np/sec/pn/2009/pn0949.htm)",
    "[IMF’s Portugal visits Lebanon](https://www.imf.org/external/np/sec/pr/2009/pr0926.htm)",
    "[Emergency Post-Conflict Assistance (EPCA)](https://www.imf.org/external/np/exr/facts/conflict.htm)",
    "[https://www.imf.org/en/home](https://www.imf.org/en/home)"
  ],
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