Lebanon

Lebanon is grappling with the devastating impact of a severe economic and financial crisis, the fallout from the recent conflict, and immense reconstruction challenges ahead.

Since 2019, Lebanon has been facing an unprecedented crisis stemming from the most severe economic and financial collapse in the country’s history. The crisis left the banking sector insolvent and caused the Lebanese pound to lose 98% of its value. It also pushed more than a third of the population into poverty, worsening regional inequalities and income disparities.

The 2023-24 conflict represented yet another shock to the country’s struggling economy.  A Rapid Damage and Needs Assessment (RDNA) published by the World Bank in November 2024 estimates that the economic cost of the conflict in Lebanon is $14 billion, with damage to physical structures amounting to $6.8 billion and economic losses from reduced productivity, foregone revenues, and operating costs reaching $7.2 billion. Reconstruction and recovery needs are estimated at $11 billion.

The election of a new President and the formation of a reform-committed government in early 2025 offers a critical opportunity to develop a new vision and strategic direction to address Lebanon’s prolonged crisis through a comprehensive reform and recovery plan. Significant financing for recovery and reconstruction is needed, given the magnitude of needs identified and the highly constrained fiscal context. Sustained progress on the reform agenda and political stability is critical to unlock financing for reconstruction and investment and help set Lebanon on a path toward long-term recovery, economic resilience, and renewed hope for its people.

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The recent escalation of the conflict in the Middle East and intensification in military operations in Lebanon is expected to stall reform momentum and heavily weigh on economic growth, and the conflict's toll on Lebanon's human and physical capital is likely to be significant.

Economic activity accelerated and reforms advanced in the second half of 2025. High frequency indicators through December 2025 point to stronger momentum in H2-2025. Fiscal outturns for 2025 indicate primary and overall surpluses on a cash basis. Official data show revenues rising by 49 percent, outpacing a 27 percent increase in expenditure. Despite a modest pickup in consumer prices in H2 2025, headline inflation fell to 14.6 percent for the year. In 2025, poverty among Lebanese nationals remained high but showed stabilization after peaking in 2024 due to conflict related disruptions and economic contraction. Food insecurity also declined from a peak of 24 percent in late 2024 to about 13 percent in early 2026, just before the onset of the conflict; food insecurity nevertheless remains high by historical standards.

The fragile rebound in economic activity is expected to come under severe stress, with risks tilted sharply to the downside. The conflict and ensuing flight disruptions across the region, are expected to halt tourism—a key engine of growth. Large-scale internal displacement and heightened uncertainty are also projected to weigh on consumption and investment. With continued dependence on oil for electricity generation and transportation, the rise in oil prices is expected to weigh on both the current account deficit and external financing needs. Higher freight rates and oil prices will stoke inflationary pressures, while increased demand for emergency and reconstruction spending will likely put the approved budget for 2026, which targets a balanced budget, under pressure.

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The World Bank is a long-standing partner of Lebanon. Throughout the past crises, the World Bank has provided Lebanon with technical assistance and financing spanning various sectors. This included the approval of new projects as well as repurposing of financing available under the portfolio to address critical emerging needs across sectors. Bank support included cash transfers to poor households, reviving small businesses after the Port of Beirut explosion, financing COVID-19 vaccines at the height of the pandemic, rehabilitating and maintaining roads, supporting teachers’ salaries, and subsidizing the purchase of wheat following Russia’s invasion of Ukraine.

More recently, the World Bank engagement strategy in Lebanon has prioritized interventions to help the country get back on a sustainable recovery track. Lebanon needs public investments in green infrastructure and reforms to transform state-owned enterprises and attract private investments. Infrastructure investments, coupled with long-overdue governance reforms, are critical to help improve the living standards of the population, enhance public services, and set the stage for a sustainable recovery and a brighter future for its people. The Lebanese private sector is known for its dynamism, making it an essential partner in addressing the triple challenge of reducing poverty, fostering economic growth, and adapting to climate change.

As of October 2025, the World Bank’s total commitments in Lebanon amount to $1.8 billion (loans, grants and concessional financing), consisting of 18 active projects spanning several sectors: energy, water; reconstruction; health; social protection and jobs; agriculture; environment; fiscal management; and Small and Medium Enterprises.

The Lebanon program is complemented by Advisory Services and Analytics that aim to provide important economic and social, evidence-based diagnostics to inform project design and policy making.

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Following the Port of Beirut explosion in August 2020, the World Bank Group, in cooperation with the United Nations and the European Union, launched a Beirut Rapid Damage and Needs Assessment (RDNA) to estimate the impact of the blast on residents, physical assets, infrastructure and service delivery. Building on the recommendations of the RDNA, the World Bank Group, EU and UN launched the Reform, Recovery and Reconstruction Framework (3RF) in December 2020, a collaborative and strategic partnership between the Government of Lebanon, the civil society, and the international community to facilitate a people-centered recovery, prepare the ground for medium-term reconstruction, and initiate key structural reforms based on the principles of transparency, inclusion, and accountability.

Shortly after, the Lebanon Financing Facility (LFF), a multi donor trust fund, was established to kickstart the immediate socio-economic recovery of vulnerable populations and businesses affected by the explosion, and to support the Government of Lebanon in catalyzing reforms and preparing for medium-term recovery and reconstruction. Administered by the World Bank with generous contributions from the governments of Canada, Denmark, France, Germany, and Norway, and from the European Union, the LFF provides an important means to pool grant resources and strengthen the coherence and coordination of financing, in alignment with 3RF priorities. It adopts flexible implementation modalities and strong fiduciary monitoring and oversight. The LFF has supported several projects and activities under three focus areas of interventions: 1) Socioeconomic and business recovery; 2) Preparing for reform and reconstruction; and 3) Strengthening coordination, monitoring, accountability and oversight of the 3RF.

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