(Refiles to clarify debt situation as context)
By Davide Barbuscia
DUBAI, Feb 11 (Reuters) - Authorities in Lebanon, which has one of the world’s highest debt to GDP ratios, have not asked the International Monetary Fund to provide funding, the IMF’s regional head told Reuters on Monday.
Lebanon has some of the world’s worst debt and balance-of-payments ratios and recently spent more than nine months without a government it needed to enact long-overdue reforms. Concern grew over the state of the economy and government finances as the impasse dragged on.
But despite its problems, the government has avoided asking for IMF aid. The IMF does provides technical assistance to Lebanon and has regular policy consultations with the government.
“We have helped them, for example, to set up a framework for investment management to make sure public investments are done properly,” said Jihad Azour, the IMF’s Middle East and Central Asia director. “But the Lebanese authorities did not request program funding.”
Lebanon’s ability to dodge financial disaster has for years confounded critics. Warnings of debt defaults, balance of payments crises and a collapse of the pound currency have all failed to materialise.
After nine months of wrangling over cabinet portfolios, Lebanon’s politicians formed a government at the end of January. Beirut has said it will enact reforms to avoid a worsening of economic, financial and social conditions.
Its financial system has depended for funding on deposits from its large diaspora into local banks, though questions over the sustainability of the model have grown remittances and deposit inflows slowed.
Azour said the formation of the government and the government’s commitment to address not only the infrastructure but also the vulnerabilities in the economy were positive signs.
“The next step is how to strengthen the credibility by moving fast” on the fiscal side and on structural reforms, he said.
The country also needs to address social protection issues, which have led to a “deterioration” of citizen confidence in the system, he said.
Lebanon needs “well-articulated and decisive moves” on reducing the budget deficit, Azour said.
International donor institutions and foreign governments want to see the new government get to work on reforms before releasing some $11 billion in financial assistance pledged at a Paris conference last April.
Azour said Lebanon needs to rebuild confidence by implementing commitments and needs to reactivate discussions with the international community to mobilize the donor pledges. (Reporting by Davide Barbuscia Editing by Lisa Barrington)