Lebanon's economy to benefit from World Bank's $250m recovery boost

Arab News

6 hours ago

JEDDAH: Lebanon's battered infrastructure and strained public services are set for a boost, as the World Bank has approved $250 million to launch a broader $1 billion recovery and reconstruction initiative.
In a statement on Wednesday, the World Bank announced that its board of executive directors had approved the funding a day earlier under the Lebanon Emergency Assistance Project.
The project follows a phased approach to address response, recovery, and reconstruction, focusing on prioritizing and sequencing interventions to achieve maximum economic and social impact in the shortest possible time.
Since October 2023, Lebanon has experienced renewed turmoil due to escalating cross-border violence between Hezbollah and Israeli forces in the country's south, which has severely damaged civilian infrastructure and disrupted essential public services.
'The Rapid Damage and Needs Assessment of the impact of the conflict in Lebanon between Oct. 8, 2023, and Dec. 20, 2024, estimated total direct damages across 10 sectors at $7.2 billion, and reconstruction and recovery needs at $11 billion,' the bank said in its press release.
It added that around $1.1 billion in damage had been sustained by key infrastructure and facilities vital to public well-being and economic activity. Affected sectors include transportation, energy, water, healthcare, education, and municipal services.
'Considering the scale of needs, the LEAP was designed to support restoration of public infrastructure and buildings, given this is a precondition to economic and social recovery,' the release explained.
According to a separate World Bank report released earlier this month, Lebanon's cumulative gross domestic product had contracted by nearly 40 percent since 2019. Meanwhile, the Lebanese pound has lost more than 98 percent of its value, driving triple-digit inflation through 2023.
The study highlighted how the collapse of the banking sector and the currency's crash turned Lebanon into a dollarized, cash-based economy worth $9.8 billion — about 45.7 percent of GDP in 2022.
'The conflict has introduced another shock to Lebanon's already crisis-ridden economy. While the economic contraction was anticipated to bottom out in 2023, following five years of sustained sharp contraction, the conflict and its spillovers have had negative knock-on effects on economic growth in 2023, continuing into 2024,' the report said.
It further noted that since July 2023, the Lebanese pound has stabilized at 89,500 to the US dollar, which helped bring inflation down to double digits in 2024 for the first time since March 2020, following three consecutive years of triple-digit inflation.
Lebanon's Prime Minister Nawaf Salam welcomed the news on social media, writing on his X account: 'I welcome the World Bank Board's approval of the $250 million Lebanon Emergency Assistance Project, which represents a key step toward reconstruction by addressing damage to critical infrastructure and essential services in areas affected by the conflict.'
He added that the assistance reinforces national recovery efforts within a government-led implementation framework and paves the way for attracting further much-needed financing.
Jean-Christophe Carret, the World Bank's Middle East division director, said: 'Given Lebanon's large reconstruction needs, the LEAP is structured as a $1 billion scalable framework with an initial $250 million contribution from the World Bank and the ability to efficiently absorb additional financing — whether grants or loans — under a unified, government-led implementation structure that emphasizes transparency, accountability, and results.'
Carret noted that the framework offers a credible platform for development partners to align their support with Lebanon's reform agenda and amplify the impact of long-term recovery efforts.
According to the statement, the financing will enable immediate interventions to fast-track recovery and return to normalcy. This includes the safe and efficient handling of rubble to maximize recycling and reuse.
To ensure timely implementation, the government has undertaken key reforms within the project's implementing body, the Council for Development and Reconstruction, the statement said.
It added that LEAP will be carried out under the strategic guidance of the prime minister's office, with coordination across relevant ministries through the Council of Ministers. The Ministry of Public Works and Transport will oversee project implementation, while the Ministry of Environment will monitor environmental and social compliance, including rubble management.