Lebanon gets record grant
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Emerging Markets

Lebanon gets record grant

Bank set to approve $70m for reconstruction. Our survival at stake, says economy minister

The World Bank governors are expected to approve an unprecedented $70 million grant to war-ravaged Lebanon in Singapore today.

Lebanese economy and trade minister Sami Haddad told Emerging Markets last night warned that nothing less than the survival of “a liberal economic democracy” in “a region of turmoil” is at stake.

If Lebanon does not receive sufficient financial aid, “this model would be in real jeopardy”, Haddad warned after leaving a meeting of the Core Group of donors to Lebanon.


Paul Wolfowitz, who before taking over the helm of the World Bank earned notoriety as an architect of aggressive US policy in the Middle East and the Iraq invasion, was at yesterday’s Core Group meeting. Haddad described the former US deputy defence secretary as having been “tremendously supportive”.


Haddad said that his country “deeply appreciates the outpouring of sympathy and support” over the damage caused by this summer’s 34-day bombardment by Israel. But he added: “We hold the international community partly responsible for this war”, citing the major powers’ failure to call for an immediate ceasefire. A World Bank spokesman said its management would recommend the biggest-ever grant to a middle income country because Lebanon could not increase its debt burden.


A US State Department source told Emerging Markets that if Lebanon fails by the start of the rainy season in November to house people displaced by bombing, that civil discontent could fuel political attempts to topple prime minister Fouad Siniora’s fragile coalition government.


A senior adviser to the Lebanese prime minister told Emerging Markets last night in a telephone interview that the war had turned the 6% growth rate into, potentially, 3-5% negative growth.


At the Core Group meeting, Lebanese finance minister Jihad Azour promised to unveil a new “economic rebound programme” in the next few weeks, and pushed for an international donor conference by the end of the year.


In a measured but impassioned speech, Azour underlined the government’s continued commitment to reform, while giving even greater priority to meeting the massive physical and human needs created by the war.


He argued for a full donor meeting, preferably in November, to help cover war losses now calculated at up to $2 billion, with another $1.6 billion in lost revenue. Aid would help build economic momentum to feed into a “renaissance” for Lebanon.


Beirut is hoping to conclude terms for Lebanon’s World Trade Organisation membership and will accelerate its social reform agenda, donors have been told. Haddad told the Core Group meeting that the war had cost around $2 billion in gross tourism receipts alone, during what had been expected to be a bumper summer season. Some 4,000 fishermen had lost their livelihoods in a damaging oil spill caused by Israeli bombing that is still being cleaned up.


As Beirut readjusts after the ceasefire, some previously agreed policies will move more slowly. The Lebanese economy will continue to hinge on private investment, Haddad reassured donors.


But until post-war donor confidence is fully restored there will be some delays – notably in the privatisation programme, where preparatory work will continue awaiting a relaunch of telecoms and other divestments.

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