## Designing a Fiscal Framework for a Prospective Commodity Producer: Options for Lebanon

_IMF Working Papers, October 23, 2014_

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## Bibliographic details
- Authors: Mariusz Jarmuzek, Diego Mesa Puyo, Najla Nakhle
- Published: October 23, 2014
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781484346143.001

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### Executive summary and key findings
- Lebanon is expected to have gas resources in its Mediterranean basin that could turn the country into a natural gas producer over the next decade.
- Lebanon’s economy and institutions will need to adapt to the challenges and opportunities arising from potential resource revenue.
- Designing an appropriate fiscal regime is an absolute prerequisite to ensure:
  - the government can receive a fair share of the resources, and
  - investors face appropriate incentives to invest and develop the sector.
- After setting a fiscal regime, the next steps are establishing macro-fiscal anchors and supporting institutions.
- The prospective framework should initially be focused on:
  - ensuring fiscal sustainability, and
  - ensuring intergenerational equity,
  given the estimated relatively short horizon of Lebanon’s gas resources.
- Strong institutional arrangements need to underpin the prospective framework to ensure the pace of resource wealth’s use is set in line with Lebanon’s capacity constraints.

### Analysis themes and policy considerations
- Fiscal regime design:
  - Balance between government take and investor incentives is central.
  - Choice of regime option should reflect rate of return, risk tolerance, and sector characteristics.
- Macroeconomic and fiscal anchors:
  - Establish anchors to manage volatility and protect fiscal sustainability.
  - Anchors should be consistent with Lebanon’s broader fiscal stance and public financial management (PFM) capacity.
- Intergenerational equity:
  - Given the relatively short horizon of resources, policies should smooth consumption and investment across generations.
- Institutional design:
  - Strong fiscal governance and accountability mechanisms are needed.
  - Considerations include government company structures, government share mechanisms, and resource revenue management frameworks.
- Implementation sequencing:
  - First: design a regime that secures fair government share and investor incentives.
  - Then: set macro-fiscal anchors and create or strengthen institutions to implement the regime and manage resource flows prudently.

### Subjects and keywords (as provided)
- Subject: Expenditure, Fiscal governance, Fiscal policy, Fiscal stance, Public financial management (PFM)
- Keywords: accountability, Fiscal governance, fiscal policy, Fiscal stance, Global, government company, government share, government take option, government wealth, Lebanese authorities, natural resource, oil-producing countries, rate of return, regime option, resource revenue, resource revenue management, risk tolerance, WP

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_Source: https://www.imf.org/en/publications/wp/issues/2016/12/31/designing-a-fiscal-framework-for-a-prospective-commodity-producer-options-for-lebanon-42414_