Will Reaching a GDP of 43 Billion Boost the IMF Deal?

The Central Administration of Statistics in Lebanon announced the official national accounts for 2023, with the Gross Domestic Product (GDP) reaching $31.6 billion, while the International Monetary Fund (IMF) estimated the figure at only $24 billion. Projections, based on nominal growth during 2024 and 2025, indicate that the GDP could reach about $43 billion in 2025, a significant increase compared to the previous estimate of $32 billion for the same year. Based on these figures, the IMF is expected to adopt the official figures issued by the Central Administration of Statistics.

This potential increase in GDP raises questions about its implications for Lebanon’s negotiations with the IMF and Eurobond holders.

Observers believe that the rise in GDP may be a relatively positive factor in Lebanon’s negotiations with the IMF, but its impact remains limited if it is not accompanied by actual reforms. The rise may show the recovery of some sectors such as services, tourism, and remittances, giving an initial impression of the economy’s ability to regain some of its health if the appropriate political and financial environment is available. It also helps to raise the ability to pay theoretically, as the higher output means a larger size of the economy, which may translate into a greater ability to collect taxes and repay debts. This may be used as a supporting factor in the recovery plan or in estimating the financial gap.

In contrast, the IMF delegation focuses in its negotiations on achieving “quality” growth for Lebanon. The Fund does not consider unbalanced growth or growth resulting from inflation, printing money, or an unrealistic exchange rate as sustainable growth. The Fund is more concerned with the transparency of public finances, reforming the banking sector, controlling the deficit, and unifying the exchange rate. Even with GDP growth, the failure to pass reform laws keeps the negotiation stuck. Therefore, the rise in GDP may improve the overall climate for negotiation, but it is not sufficient in itself. What is required is real and sustainable growth supported by structural reforms.

Economic experts believe that the GDP in Lebanon decreased in 2020, and since then, the GDP has been rising annually. They point out that the latest figures announced by the Central Administration of Statistics are useful for Lebanon in its negotiations with the IMF and Eurobond holders, and are an indicator that the Lebanese state is able to recover from the crisis faster, and that the Lebanese economy is growing faster and will improve Lebanon’s position during negotiations with the Fund.

The experts add that the assets of the Banque du Liban (BDL) in foreign currencies and gold are another positive factor that will increase the BDL’s budget and enable it to pay its obligations to banks and the state to pay its debts to the Central Bank, stressing that technically and economically there is an improvement, and that Lebanon is implementing almost all the conditions required of it by the Fund (reform laws, and a budget without a deficit), but the matter relates to the political aspect and whether the Lebanese authority will sign with the IMF or not, because the agreement with the Fund is a political cover for Lebanon that can encourage investment funds and countries to grant Lebanon aid for reconstruction.

The experts conclude by pointing out that the political decision is the most important, even if the implementation of the technical conditions helps to reach an agreement.