Lebanon is crippled by debt but still asks for more from the WB!

Thu, 08/25/2016

For a long time now, the Lebanese government has followed a policy of building up internal and external public debt, while attempting to deal with its chronic political and economic crisis, thus resulting in a soaring level of indebtedness that has reached USD71.5 billion as per the figures in May 2016. It is worth saying that the current size of debt largely exceeds that of GDP which was estimated at USD 47 billion in 2016 and that is according to the World Bank.
Last July, the Lebanese government signed with the World Bank a new $2 billion-worth lending agreement, for the period extending between 2017 and 2022. In principle, the aim of this agreement is to tackle the refugees’ problem, but more so, to repair the country’s ailing infrastructure. More specifically, this new agreement will allow the set up of new projects that will address basic needs, create employment opportunities, expand the infrastructure and provide services to both Lebanese and other residents in Lebanon. According to the World Bank statement, the new funding program targets various sectors namely services (water, environment, transportation and municipalities), education, health, social security, job creation through improving business environments (improving administrative procedures, combatting corruption, developing taxation policies).
A quick comparison with the previous 2011 – 2014 program shows that the earlier also focused on very much the same sectors namely the economic infrastructure (electricity, water, transportation, environment and recycling, local development, competitive business environment). However the infrastructure of the country, rather than improving, continues to deteriorate.
A more detailed review of the agreement reveals that only $50 million have been allocated to job creation, and that is through the private sector. This sector, i.e. job creation, represents 2.5% only of the total value of the program despite its vital importance in view of the increased unemployment resulting for current regional instability. The other sectors which seem to have attracted the majority of funding relate to upgrading public utilities and social services, which will improve only to a limited extent the living conditions of Syrian refugees. Also to be noted that aside from the new World Bank agreement, Lebanon received pledges for additional loans within the framework of “The Concessional Financing Facility” program. It is to be noted that the said program is an international initiative aimed at mitigating the impact of Syrian displacement and for which Lebanon and Jordan were both allocated some $340 million.
In conclusion, one can safely claim that governing parties in Lebanon that have constantly failed in finding appropriate solutions for the many complex problems plaguing Lebanon, persist in their futile and potentially dangerous financial policy despite the fact that the country enjoys untapped financial wealth represented by $188 billion in bank deposits. In any case, the new agreement with the World Bank may well just remain ink on paper, should the current political impasse in the country continue, thus obstructing the implementation of any international financial agreement, and frustrating the implementation of the much-needed social and economic programmes targeting citizens and residents of the country.