Lebanon risks losing international financing

Friday 06/11/2015
Lebanon’s Prime Minister Tammam Salam (L) with Lebanese Parliament Speaker Nabih Berri (C) and Lebanese political leader Michel Aoun (R) during a session of the national dialogue talks at the par­liament building, in Beirut, on September 22nd.

Beirut - Lebanon risks losing hun­dreds of million dollars in international loans for key development projects because of its paralysed parliament. To secure the funds, parliament is supposed to meet to endorse loan agreements or intro­duce legislative reforms tied to the money.
However, the legislature, deeply divided over issues ranging from the election of a new president and passing a new election law to deal­ing with the conflict in neighbour­ing Syria, has not met since May 2014.
Lebanon has been without a pres­ident since Michel Suleiman’s term expired at the same time, while the parliament has legislated a full four-year term for itself because the government failed to have general elections in 2009. Meanwhile, the cabinet rarely meets as ministers are bickering about how it should operate during the presidential vacuum.
The World Bank warns that Lebanon could lose half a portfo­lio worth $1.1 billion if parliament fails to ratify loan agreements be­fore December 31st. About half that money is for the Bisri Dam project in southern Lebanon, which is sup­posed to provide 1.6 million people with water for drinking and irriga­tion.
Legislative inaction has led France to cancel a $51 million con­tribution for building schools and $77 million for the electricity sector in a country where power outages are regular occurrences. Another $77 million from France for a water purification project is also on the line because parliament has not rat­ified a water code that is a condition for receiving the funds.
The World Bank has annulled about $40 million in funding in 2015. “Lebanon is sending all the wrong signals to the international community, undermining its cred­ibility and reinforcing scepticism of its ability to function with credible institutions,” World Bank Middle East Director Ferid Belhaj wrote on the organisation’s website.
“It is a sad case of a country brought to its knees because of missed opportunities, because sec­tarian politics plagues every aspect of life. Only an urgent decision to separate politics and the economic and developmental agenda will reverse the country’s descent into despair and recover credibility with Lebanon’s partners who are ready, willing and able to help,” he said.
A World Bank report focused on the country’s waning economic, political and social cohesion, ex­posed ills in the Lebanese system of governance: confessionalism and corruption.
The report concludes that, be­hind the veil of protecting an an­tiquated power-sharing system among Lebanon’s 18 communities, the country has slid into a “govern­ance trap”, where the state’s duty to evenhandedly serve its citizens and offer them equal opportunities has eroded.
“The cancelled loans were not cancelled to punish or pressure Lebanon,” a source at the World Bank’s Beirut office said. “On the contrary, we tried as much as we could to keep the loans going pend­ing parliamentary endorsement.” Other World Bank projects worth about $500 million are being im­plemented but not as quickly as de­sired, risking poor outcomes.
According to Lebanon’s constitu­tion, when the president’s post is vacant, parliament becomes a mere electorate. “However, since the constitution doesn’t say that par­liament can’t legislate under such conditions, Speaker Nabih Berri is pressing for a legislative session by parliament to pass the loan deals and allow for many sorts of govern­ment spending,” a parliamentary source said.
Public spending has been gov­erned by the 2005 budget as politi­cal divisions have obstructed the passing of government budgets. Fi­nance Minister Ali Hassan Khalil, a member of Berri’s Amal Movement, has repeatedly called for passing a new budget or at least legislate ad­ditional spending.
A last-minute “legal scenario” allowed for payment of salaries to government employees and ser­vice members in October but Khalil warned that the solution would be in effect until the end of the year.
The conflict in Syria has seen more than 1 million refugees pour into Lebanon, costing the economy about $7.5 billion, according to the World Bank. The political deadlock has manifested itself most recently in a trash crisis created by the gov­ernment’s failure to respond to the closure of the country’s largest landfill.
Nevertheless, delays and the loss of funding for key projects in a country with crumbling infrastruc­ture frustrate residents and donors alike.
“Lebanon is a priority for France and it is with reluctance that we have been forced to cancel these loans because we could not contin­ue to delay them forever,” a French diplomat in Lebanon told Agence France-Presse. “We have other projects that are waiting, and we hope that the approvals will come through so we will not be forced to cancel loans that would benefit all Lebanese.”
Lebanon risks losing international financing
Lebanon’s Prime Minister Tammam Salam (L) with Lebanese Parliament Speaker Nabih Berri (C) and Lebanese political leader Michel Aoun (R) during a session of the national dialogue talks at the par­liament building, in Beirut, on September 22nd.
Beirut
L ebanon risks losing hun­dreds of million dollars in international loans for key development projects because of its paralysed parliament. To secure the funds, parliament is supposed to meet to endorse loan agreements or intro­duce legislative reforms tied to the money.
However, the legislature, deeply divided over issues ranging from the election of a new president and passing a new election law to deal­ing with the conflict in neighbour­ing Syria, has not met since May 2014.
Lebanon has been without a pres­ident since Michel Suleiman’s term expired at the same time, while the parliament has legislated a full four-year term for itself because the government failed to have general elections in 2009. Meanwhile, the cabinet rarely meets as ministers are bickering about how it should operate during the presidential vacuum.
The World Bank warns that Lebanon could lose half a portfo­lio worth $1.1 billion if parliament fails to ratify loan agreements be­fore December 31st. About half that money is for the Bisri Dam project in southern Lebanon, which is sup­posed to provide 1.6 million people with water for drinking and irriga­tion.
Legislative inaction has led France to cancel a $51 million con­tribution for building schools and $77 million for the electricity sector in a country where power outages are regular occurrences. Another $77 million from France for a water purification project is also on the line because parliament has not rat­ified a water code that is a condition for receiving the funds.
The World Bank has annulled about $40 million in funding in 2015. “Lebanon is sending all the wrong signals to the international community, undermining its cred­ibility and reinforcing scepticism of its ability to function with credible institutions,” World Bank Middle East Director Ferid Belhaj wrote on the organisation’s website.
“It is a sad case of a country brought to its knees because of missed opportunities, because sec­tarian politics plagues every aspect of life. Only an urgent decision to separate politics and the economic and developmental agenda will reverse the country’s descent into despair and recover credibility with Lebanon’s partners who are ready, willing and able to help,” he said.
A World Bank report focused on the country’s waning economic, political and social cohesion, ex­posed ills in the Lebanese system of governance: confessionalism and corruption.
The report concludes that, be­hind the veil of protecting an an­tiquated power-sharing system among Lebanon’s 18 communities, the country has slid into a “govern­ance trap”, where the state’s duty to evenhandedly serve its citizens and offer them equal opportunities has eroded.
“The cancelled loans were not cancelled to punish or pressure Lebanon,” a source at the World Bank’s Beirut office said. “On the contrary, we tried as much as we could to keep the loans going pend­ing parliamentary endorsement.” Other World Bank projects worth about $500 million are being im­plemented but not as quickly as de­sired, risking poor outcomes.
According to Lebanon’s constitu­tion, when the president’s post is vacant, parliament becomes a mere electorate. “However, since the constitution doesn’t say that par­liament can’t legislate under such conditions, Speaker Nabih Berri is pressing for a legislative session by parliament to pass the loan deals and allow for many sorts of govern­ment spending,” a parliamentary source said.
Public spending has been gov­erned by the 2005 budget as politi­cal divisions have obstructed the passing of government budgets. Fi­nance Minister Ali Hassan Khalil, a member of Berri’s Amal Movement, has repeatedly called for passing a new budget or at least legislate ad­ditional spending.
A last-minute “legal scenario” allowed for payment of salaries to government employees and ser­vice members in October but Khalil warned that the solution would be in effect until the end of the year.
The conflict in Syria has seen more than 1 million refugees pour into Lebanon, costing the economy about $7.5 billion, according to the World Bank. The political deadlock has manifested itself most recently in a trash crisis created by the gov­ernment’s failure to respond to the closure of the country’s largest landfill.
Nevertheless, delays and the loss of funding for key projects in a country with crumbling infrastruc­ture frustrate residents and donors alike.
“Lebanon is a priority for France and it is with reluctance that we have been forced to cancel these loans because we could not contin­ue to delay them forever,” a French diplomat in Lebanon told Agence France-Presse. “We have other projects that are waiting, and we hope that the approvals will come through so we will not be forced to cancel loans that would benefit all Lebanese.”

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