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

34 Pages Posted: 22 Nov 2014

See all articles by Mariusz Jarmuzek

Mariusz Jarmuzek

European Central Bank (ECB); International Monetary Fund (IMF)

Diego Mesa Puyo

International Monetary Fund (IMF)

Najla Nakhle

International Monetary Fund (IMF)

Date Written: October 2014

Abstract

Lebanon is expected to have gas resources in its Mediterranean basin, and these could turn thecountry into a natural gas producer over the next decade. Lebanon’s economy and institutions will thus need to adapt to the challenges and opportunities that such change will bring. In this paper, we address how Lebanon’s fiscal framework will need to be reformulated to take into account potential resource revenue. Designing a fiscal regime appropriately is an absolute prerequisite to make sure the government can receive a fair share of the resources while investors face appropriate incentives to invest and develop the sector. This step should be followed by setting macro-fiscal anchors and supporting institutions. The prospective framework should initially be focused on ensuring fiscal sustainability and intergenerational equity, given the estimated relatively short horizon of Lebanon’s gas resources. Strong institutional arrangements also need to underpin the prospective framework, to ensure that the pace of resource wealth’s use is set in line with Lebanon’s capacity constraints.

Keywords: Fiscal framework, Lebanon, Fiscal policy, Natural resources, Oil producing countries, oil-producing countries, resource revenue management, accountability, fiscal regime, fiscal stance, fiscal sustainability, taxation, fiscal instruments, fiscal arrangements, fiscal institutions, fiscal target, fiscal responsibility, fiscal responsibility law, fiscal frameworks, fiscal policy framework, fiscal management, fiscal terms, fiscal adjustment, fiscal agency, tax reform, fiscal policy decisions, fiscal strategy, fiscal policy formulation, fiscal stability, fiscal expansion, public expenditures, fiscal outcomes, sustainable fiscal policy, tax base, government spending, tax credits, fiscal balance, t

JEL Classification: E02, E62, H11, H50, H60

Suggested Citation

Jarmuzek, Mariusz and Mesa Puyo, Diego and Nakhle, Najla, Designing a Fiscal Framework for a Prospective Commodity Producer: Options for Lebanon (October 2014). IMF Working Paper No. 14/193, Available at SSRN: https://ssrn.com/abstract=2529312

Mariusz Jarmuzek (Contact Author)

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

International Monetary Fund (IMF) ( email )

700 19th Street N.W.
Washington, DC 20431
United States

Diego Mesa Puyo

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Najla Nakhle

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

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