Lebanon, Ravaged by War, Needs Changes to Unlock Aid. That Could Be a Tall Order.

New York Times

24-03-2025

On his first day in office, Lebanon's new finance minister, Yassine Jaber, sat at his desk reading a color-coded report on the dire state of the ministry's operations. Nearly everything was marked in alarming red.
The computers were decades old — some still ran on Windows 98. Like much of the government, the ministry relied on mountains of paper records, allowing dysfunction and corruption to fester.
'Things cannot continue as they are,' he sighed.
To fix how it's run, Lebanon needs money. But to attract money, it needs to fix how it's run: For years, it has failed to enact sweeping financial and governance overhauls required to unlock billions in international financial assistance that it has needed to address a debilitating economic crisis.
Now, that support is even more critical after the devastating 14-month war between Israel and Hezbollah, the Iran-backed militia that has long held political sway in this tiny Mediterranean country. A fragile truce is holding, but large parts of Lebanon are in ruins. Hezbollah has been left battered and cannot pay for reconstruction. Lebanon's new government is able to afford 'frankly none' of the bill, Mr. Jaber said.
Foreign donors hold the key to Lebanon's recovery, but to meet their demands, the state must do what it has never done before: Undertake painful economic and structural changes, while confronting the thorny issue of Hezbollah's arms.
'The foreign aid is not just charity,' said Paul Salem, the vice president for international engagement at the Middle East Institute in Washington. 'They are not going to give billions and billions of dollars unless their position is respected.'
The total damage and economic loss from the war is estimated to be $14 billion, and Lebanon needs $11 billion to rebuild, the World Bank said this month, making the conflict the country's most destructive since its long civil war ended in 1990.
'It's very important to move fast on reconstruction; people are sleeping in tents. You have a whole part of Lebanon paralyzed,' said Mr. Jaber on that day in his office last month. 'Everything today is a priority.'
The devastation has compounded the country's economic woes, which began in 2019 when its financial system collapsed under the burden of state debt. That triggered a sovereign default and prompted banks to impose informal capital controls, leaving many Lebanese people with their life savings frozen.
Lebanon reached a draft funding deal with the International Monetary Fund in 2022 that was billed as a lifeline for the country, but it was conditioned on changes, including addressing the country's weak governance and restructuring its financial sector. The government failed to deliver, hindered by deadlock and vested interests of the country's political elite.
'Lebanon has to start by helping itself,' Mr. Jaber said. 'How do you do that? By starting to show real action.'
Mr. Jaber spoke with The New York Times the day after Lebanon's new government received a vote of confidence that has sidelined Hezbollah politically. Mr. Jaber, now one of the country's most powerful figures, holds the reins to public spending and is responsible for reconstruction efforts and securing foreign aid.
Hezbollah's patron, Iran, contributed heavily to reconstruction after their the group's last major conflict with Israel in 2006, but is now largely unwilling because of its own crises, analysts said. The group has been further isolated by the collapse of another ally, the Assad regime in neighboring Syria.
As a result, Hezbollah — so powerful before the war that it was widely considered a state within a state — cannot finance reconstruction, Mr. Jaber said.
'It's a different era,' he said.
Lebanon has so far secured a pledge of $250 million in reconstruction aid from the World Bank, said Mr. Jaber, an initial loan that is part of a broader $1 billion fund to be provided by donor countries, but amounting to only 2 percent of what the World Bank says the country needs.
Some experts question how quickly the government can make systemic changes. President Joseph Aoun has said that he hopes the foreign aid can come 'step by step' as new policies are implemented.
Adding to the uncertainty, international assistance may depend on more than just a financial overhaul. Under the terms of the truce deal that ended the war in November, Hezbollah must also disarm — a task that could risk violence between Hezbollah's largely Shiite supporters and domestic opponents. Experts said that the United States and Gulf Arab countries consider disarmament a prerequisite for large-scale assistance.
The Lebanese government has promised to bring all weapons under the state's control, but it remains unclear how exactly it will achieve that, and if so, when. Mr. Jaber did not comment on disarming Hezbollah, but noted that the group was an established political party with popular support and that its political role was not a point of contention.
Hezbollah remains a potent military force, and some Lebanese officials have ruled out forcibly disarming it, hinting at a negotiated settlement. Earlier this month, the group's leader, Naim Qassem, implicitly rejected the idea that the 'resistance' would lay down its weapons.
The government is 'being bombarded by both demands: painful economic and financial reforms, and strangling Hezbollah's finances and presence,' said Mohanad Hage Ali, a senior fellow at the Carnegie Middle East Center in Beirut. But, without funding first, 'you are pushing a government and a president, with no juice, to meet the most challenging goals.'
Hezbollah officials have insisted that reconstruction must not be linked to overhaul demands, fearing a loss of support if the rebuilding process is drawn out, experts said. Nearly 100,000 people are displaced in Lebanon, according to the United Nations, the vast majority of them from Hezbollah's heartlands in the south.
'Reform will take a hell of a long time,' Mr. Hage Ali said.
Seeking to reassure Hezbollah's supporters, Mr. Qassem, the group's leader, has promised compensation for each affected household of between $12,000 and $14,000, intended to cover rent costs and replace furniture. But the process has been marred by delays.
With Hezbollah largely sidelined, a flurry of diplomatic efforts are underway to reassure foreign donors. Lebanese officials met this month with an I.M.F. delegation in Beirut, which Mr. Jaber said aimed to restart negotiations over the organization's long-awaited rescue package. A top European Union official said last month that Brussels would monitor the talks to assess whether Europe could offer its own financial aid.
An immediate priority, Mr. Jaber said, is appointing a central bank governor who can set about reviving the country's banking sector. Lebanon has failed to name a successor since Riad Salameh stepped down from the role in 2023, facing accusations that he ran the world's largest Ponzi scheme for overseeing a strategy that required ever more borrowing to pay creditors.
Lebanon's new leaders have also promised an external audit of all public institutions, part of a broader pledge to crack down on the corruption that has long plagued the country.
Mr. Jaber said he was hopeful but acknowledged the uncertainty ahead.
'Where there is a will, there is a way,' he said. The government faces a test 'on the issue of their will.'