Beirut, September 5, 2020 – The World Bank today notified the Government of Lebanon (GOL) of its decision to cancel the undisbursed funds under the Water Supply Augmentation Project (Bisri Dam Project) due to non-completion of the tasks that are preconditions to the commencement of construction of the Bisri Dam.
The canceled portion of the loan is US$244 million and the cancellation is effective immediately. Certain categories of expenditures related to fiduciary and environmental/social safeguards requirements will remain exempt from cancellation at this time.
The Bisri Dam project had been under partial suspension since June 26, 2020 after the World Bank had, since early January 2020, repeatedly raised its concerns about issues adversely affecting its successful implementation. The World Bank had established July 22, 2020 as a deadline for the GOL to meet all the requirements in a manner satisfactory to the Bank for said partial suspension to be lifted, in the absence of which the suspended portion of the loan would be canceled.
In response to the GOL’s request for a three-month extension of the July 22 deadline set by the World Bank and taking into consideration the constraints imposed by COVID-19, the World Bank had agreed to a six weeks extension ending on September 4, 2020. The Bank indicated that the suspended portion of the Loan would be canceled unless it receives satisfactory evidence that: (a) the Government has finalized the Ecological Compensation Plan (ECP) following due process and in consultation with key stakeholders by no later than September 4, 2020; (b) the Government has finalized the Operation and Maintenance (O&M) arrangements by no later than August 24, 2020, and (c) the contractor is mobilized at the worksite by no later than September 4, 2020.
The GOL submitted a draft ECP on August 12, 2020, and the World Bank provided its comments on August 25, 2020. To date, these comments have not been addressed to the satisfaction of the Bank and stakeholder consultations have not taken place.
The GOL submitted a Memorandum of Understanding (MoU) for the O&M arrangements on August 24, 2020. The MoU departs from the requirements of the Loan Agreement and the Bank requested further details on the institutional and financial mechanisms put in place between the Ministry of Energy and Water and the Beirut Mount Lebanon Water Establishment. Without this information, the World Bank is not in a position to determine that the Loan Agreement covenant has been achieved.
Finally, the contractor has not been mobilized at the worksite.
In sum, as of the agreed deadline of September 4, 2020, the World Bank has not received satisfactory evidence that the three required actions have been achieved. Consequently, the above-mentioned cancellation has entered into effect.
In addition, the World Bank had repeatedly stressed upon the critical need to maintain an open, transparent and inclusive consultative process around the project and requested to receive an update on the GOL’s ongoing engagement with Lebanese stakeholders. The Bank also encouraged the GOL to explore engaging with an independent third party to initiate dialogue with all stakeholders.
Lebanon was already reeling from multiple crises prior to the tragic explosion in the port of Beirut on August 4 which has caused devastating losses on the human, social and economic levels. This latest disaster will not only exacerbate the contraction in economic activity, but also worsen poverty rates, which were already at 45 percent of the population just prior to the explosion.
The recent Beirut Rapid Damage and Needs Assessment, prepared by the World Bank in cooperation with the United Nations and the European Union, identifies critical recovery needs in the immediate and short-term to provide immediate relief to the most severely affected population, create short-term jobs, repair housing, provide shelter and restore services of micro and small businesses that employ thousands of Lebanese.
The World Bank reiterates its readiness to work with the GOL to see how the existing portfolio, including undisbursed amounts from the canceled Bisri project, could be used most effectively to respond to the emerging needs of the Lebanese people.
The World Bank has been a long-standing partner of Lebanon and the Lebanese people and reiterates its commitment to support efforts to address the social, financial and economic challenges the country is enduring.
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