World Bank: 'irreversible' damage awaits if Lebanon does not reform

Lebanon's economic and financial crisis will lead to irreparable damage if the country's political leadership fails to enact reforms, the World Bank says.

“The consequences of the ongoing crisis are going to be irreversible in many ways, as far as human capital is concerned and of course levels of prosperity in the country,” Saroj Kumar Jha, the Levant regional director at the World Bank, said on Friday.

Mr Jha was speaking at the official launch of the “Reform, Recovery and Reconstruction Framework”, a plan developed by the EU, UN and the World Bank to support Lebanon after a deadly explosion struck Beirut port four months ago, killing more than 200 people. The distribution of funds and the execution of the projects will be overseen by the World Bank and an independent monitoring body.

The Lebanese government is also in talks with the bank for a $246 million emergency loan for social safety nets, which will be unlocked in early January to provide poor families with cash assistance, Mr Jha said.

Lebanon's political leaders are widely accused of corruption and mismanagement, an endemic problem believed to have led the country to near economic collapse.

A recent report by the World Bank estimates Lebanon's real GDP will shrink by nearly 20 per cent in 2020, and that half of the population could fall into poverty by 2021 unless it adopts a reform programme that improves social protection measures and widens the pension system.

“In a business as usual scenario where no substantial reforms happen, we are looking at a 14 per cent contraction in 2021,” Mr Jha said. “This is catastrophic.”

The launch of the plan was announced on Wednesday during a French-led humanitarian conference for Lebanon. It estimates that Lebanon requires $2.5 billion in the next 18 months to recover and rebuild from the explosion at the port.

More than $340m in aid has been disbursed since August to help Lebanese recover from the blast, French President Emmanuel Macron said on Wednesday.

Mr Macron had set out a road map for reform in September to help Lebanon to recover from the triple effect of the devastating blast, a crippling financial crisis that began last year and the economic downturn caused by the Covid-19 pandemic.

Lebanese political leaders endorsed the French initiative and promised Mr Macron, who visited Beirut twice since the August 4 explosion, to form a new government quickly and enact the reforms necessary to unlock billions in debt relief and international funds. Prime Minister Hassan Diab resigned in August after the blast.

Four months later, these promises have yet to materialise.

“We will all continue to support the Lebanese people,” Mr Macron said on Wednesday. “But this support cannot be a substitute for the growing responsibility of Lebanese authorities to let Lebanon live.”

Mr Macron said he would travel to Beirut again this month, in a visit to pressure Lebanese leaders into action.