Overview

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Context
Strategy

One of the key issues facing Lebanon is the economic and social impact of the Syrian crisis, now in its ninth year. According to government and independent sources, up to 1.5 million Syrians, about a quarter of the Lebanese population, have taken refuge in Lebanon since the conflict erupted in March 2011. This has strained Lebanon’s public finances, service delivery, and the environment. The crisis is expected to worsen poverty incidence among Lebanese citizens as well as widen income inequality. In particular, it is estimated that as a result of the Syrian crisis, some 200,000 additional Lebanese have been pushed into poverty, adding to the erstwhile 1 million poor. An additional 250,000 to 300,000 Lebanese citizens are estimated to have become unemployed, most of them unskilled youth.
Within this challenging environment, GDP growth in Lebanon in 2018 is estimated to have only grown by an estimated 0.2 percent, compared to 0.6 percent in 2017. The deceleration in economic activity is linked to policy-based tightening of liquidity, specifically, the halt in subsidized lending by the central bank (BdL) that was being channeled via commercial banks to (mostly) the real estate sector, providing a rare source of growth impetus since 2012. Inflation soared in 2018, averaging 6.1 percent for the year, compared to 4.7 percent in 2017, but has been on a lower trajectory. The fiscal position deteriorated sharply in 2018. The fiscal deficit widened by an estimated 4.5 pp to reach 11.5 percent of GDP, while the primary balance went from a surplus of 2.3 percent of GDP to -1.8 percent. This deterioration is driven by a higher debt service; increased transfers to EdL due to more expensive fuel; and a surge in transfers to municipalities, likely motivated by electioneering. The debt-to-GDP ratio is expected to persist in an unsustainable path, at 151 percent by end-2018. Externally, despite an improved trade in goods balance, the Net Foreign Asset position accumulated a loss of US$ 4,823 million in 2018, compared to a loss of US$ 156 million in 2017. The tapering of capital inflows has reflected on BdL’s foreign exchange reserves, which decreased by US$ 2.3 billion to reach US$ 39.7 billion (including Lebanese Eurobonds) by end-2018, equivalent to 13.5 months of imports of goods and services.

Last Updated: Apr 01, 2019
The World Bank Group (WBG) Country Partnership Framework (CPF) FY17-FY22 for the Lebanese Republic was launched on July 14, 2016. The Lebanon CPF which was informed by a broad range of consultations with the Government, Parliament, the private sector and civil society is focused on: (i) scaling up access to and quality of service delivery; and (ii) expanding economic opportunities and increasing human capital. Through these two focus areas, the WBG will help Lebanon mitigate the economic and social impact of the Syria crisis, safeguard the country’s development gains, and enhance stability and development prospects in the coming years. In parallel, the International Finance Corporation (IFC) will continue to support private sector development through investments and advisory work in key sectors with the aim to increase employment opportunities. MIGA will continue to work together with IFC to identify potential opportunities for support through its guarantee products. The theme of governance and renewing the social contract cuts across the CPF with the aim of regaining the trust of citizens through the promotion of social and economic inclusion and enhancing the quality of public services. The CPF also mainstreams gender into the two focus areas, in particular in the area of expanding economic opportunities and increasing human capital.
In cooperation with other regional and international development partners, the WBG is deploying concessional resources to help Lebanon respond to the impact of the Syrian refugee crisis through an exceptional US$100 million International Development Association (IDA) allocation and the establishment of the Global Concessional Financing Facility (GCFF). This is in addition to the multi-donor trust fund established in December 2013, the objective of which is to finance through grants projects directly linked to the impact of the Syrian crisis on the Lebanese citizens.
As of March 18, 2019, the World Bank’s total portfolio in Lebanon is $2.17 billion, consisting of 15 active projects and covering a range of sectors including water, transport, education, health, poverty targeting, environment, SMEs, land administration, and job creation. These projects are financed by a variety of sources, including special mechanisms such as the Global Concessional Financing Facility, which is providing financing to help Lebanon mitigate the fallout of the Syrian conflict and the refugee influx. Lebanon also obtained a $100 million financing from the International Development Association, whose funding is normally reserved for Low-Income Countries, not those classified as Middle-Income Countries, such as Lebanon. The program is also complemented by a number of Advisory Services and Analytics that aim at providing important economic and social evidence-based diagnostics, which serve as data platforms to inform project design and stakeholders.
International Finance Corporation (IFC)
IFC’s strategy in Lebanon focuses on financial markets (including microfinance) to increase access to finance for Micro, small and Medium Enterprises (SMEs). In addition, selective investments in infrastructure and manufacturing sectors are underway to help create jobs, and intra and inter regional investments with Lebanese investor. IFC advisory activities seek to improve investment climate and introduce innovative approaches that leverage the dynamism of Lebanon’s private sector in areas such as climate change (through sustainable energy finance), women in banking, corporate governance, and SME Development. Given the prevailing humanitarian crisis in Lebanon, IFC will continue collaborating with entities providing support to local communities faced with increasing economic pressure as a result of the Syrian crisis, such as Al Majmoua Microfinance, among others IFC plans to reach out to refugee and other underserved markets. IFC’s portfolio in Lebanon has nearly doubled since 2010 and current outstanding portfolio stands at nearly US$950 million as of end of 2018, mostly in financial institutions, followed by construction and retail.
Multilateral Investment Guarantee Agency (MIGA)
In 2014, MIGA insured its first ever project in Lebanon in the electricity distribution sector, with an outstanding gross exposure of US$35 million as of March 2019. The project entails a private sector power distribution service provider contract with EDL to provide electricity metering and related services for the Northern Lebanon region. The contract has run for four years and was extended for an additional four years in December 2018. MIGA is seeking to support more projects in Lebanon aligned with the Lebanon CPF FY17-FY22.

Last Updated: Apr 01, 2019

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Lebanon: Commitments by Fiscal Year (in millions of dollars)*

*Amounts include IBRD and IDA commitments

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