One of the key issues the new government needed to address was the economic and social impact of the Syrian crisis on Lebanon, including the impact of hosting roughly one million Syrian refugees who have entered Lebanon since the conflict started.
GDP growth in Lebanon is 0.9% in 2013. The Syrian conflict is disrupting Lebanon’s trade routes for exports and imports of goods, as well as tourism and financial services. This has placed downward pressure on government revenues which, combined with rising demand for public services due to the large refugee influx, is further damaging Lebanon’s public finances.
The combination of lower revenue and higher expenditure widened Lebanon’s already large fiscal deficit by US$2.6 billion from 2012 to 2014. By the end of 2014, some 170,000 additional Lebanese may be pushed into poverty (above the current 1 million). An additional 220,000 to 320,000 Lebanese citizens are expected to become unemployed, most of them unskilled youth. The number of Syrian children enrolled in public schools might reach between 140,000 and 170,000, amounting to 57% of the public school students in Lebanon. The refugee influx has also had a negative impact on health and strained infrastructure.
The World Bank’s Country Partnership Strategy (CPS) for the fiscal years 2011/14 focuses on four strategic goals: strengthening fiscal and public financial management; improving competitiveness; improving economic infrastructure; and enhancing human capital development and social protection. The strategy also addresses gender and economic integration within the region.
The CPS progress report (April 2013) re-confirmed the relevance of the strategic goals and acknowledged the need for the World Bank’s program to remain flexible in order to adapt to the changing circumstances, especially with regard to the mounting impact of the Syrian conflict on the social and economic well-being of the country.
At the request of the Government of Lebanon, the World Bank, in collaboration with other partners, prepared an assessment of the Economic and Social Impact Assessment of the Syrian refugees on Lebanon (ESIA) which provides a basis for the government to frame and define its needs and priorities in terms of the assistance it seeks from the international community. This ESIA was discussed at the first meeting of the International Support Group for Lebanon on the margins of the United Nations General Assembly meetings in September 2013. Subsequently, Lebanon’s needs and priorities were set out in the Lebanon Roadmap of Priority Interventions for Stabilization from the Syrian Conflict, which was endorsed by development partners at the Annual Meetings of the World Bank in October, 2013, and a Multi-Donor Trust Fund (MDTF) was established by the World Bank to channel donor funds to the projects identified in the Roadmap. To date, the MDTF has received contributions from Finland, France, and Norway, as well as the World Bank-administered State and Peace-Building Trust Fund (SPBF).
As of February 2014, the World Bank portfolio consisted of 19 active projects (investment lending and grants), focusing on education, social protection, urban development, transport, water, environment, the finance or private sector, social services and telecommunications for a total commitment of US$511 million, of which a total of US$158 million had been disbursed.
The Second Fiscal Management Reform Project (US$5.2 million) is due to be presented to the World Bank’s Board of Executive Directors in April 2014. In addition, the World Bank prepared a Municipal Services Emergency Project that received US$10 million in funding from the SPBF to support Lebanese communities hosting Syrian refugees. Ongoing Technical Assistance, and Analytical and Advisory Activities, cut across the four CPS pillars and continued to inform policies around reform, as well as the design of the World Bank Group’s program in Lebanon.
International Finance Corporation (IFC): The IFC has had a growing investment program in Lebanon over the recent years.- Despite a weakened economy and political/security uncertainties, the IFC had a record year in fiscal year203 in Lebanon, making almost US$507 million in investment commitments. In addition to a strong trade finance program with US$497 million guarantees, the IFC committed US$2 million to a local microfinance institution (Ameen) -- its first investment in the sector in Lebanon. It also committed US$8 million to improve the distribution of electricity. It is closely monitoring the impact of Syria on its clients and portfolio.
Multilateral Investment Guarantee Agency (MIGA): In fiscal year 2014, MIGA insured its first ever project in Lebanon in the electricity distribution sector with a gross exposure of US$35.5 million as of the end of January 2014. MIGA also had outstanding guarantees to Lebanese investors for two projects in the manufacturing and financial services sectors, totaling US$6.3 million.
· In the Water and Wastewater Sector, over 134 km of water distribution and wastewater collection networks were installed, and 194 km of water supply networks were rehabilitated.
· In the Municipal Sector, improved access to basic services has been achieved through building/upgrading of local infrastructure; construction of roads, of retaining walls, the installation of streetlight poles and improvement of storm drainage networks, as well as the improvement of potable water networks and rehabilitation of sewerage networks. Municipal buildings were reconstructed, in addition to the construction of public facilities in 15 municipalities.
· World Bank support in the Urban Transport Sector resulted in the development of a Public Transport Strategy (TransBeirut) to improve mobility within the Greater Beirut Area. A Traffic Management Program has been successfully implemented with plans for operating it.
· In the Cultural Heritage and Urban Development Sector, improved conditions for local economic development in five historic city centers was achieved with new rehabilitation activities in historic urban cores; the rehabilitation of pedestrian public spaces and of the facades of historic buildings. These activities led to a 14% increase in private sector investments in the tourism and heritage sector.
· In the Social Protection Sector, the National Poverty Targeting Program (NPTP) under the Emergency Social Protection Implementation Support Project promotes gender equality with the goal of ensuring that 50% of all beneficiaries are women. In the first round, out of 84,322 total beneficiaries, approximately 48% were women. The New Entrants to Work Program aims to have women make up 50% of those enrolled in the program for soft skills training and on-the-job training. Under the Social Promotion and Protection Project, grants for income-generating activities will be provided to vulnerable groups in Lebanon, especially female- headed of households. To help mitigate the impact of the Syrian conflict on poverty in Lebanon, the World Bank is preparing a scaling up of the NPTP bringing together grant-financing and technical expertise from the World Bank (US$8.1 million) and others to reach 360,000 Lebanese individuals who could otherwise be living in extreme poverty by 2016.
· Achievements in the Education Sector include: building and equipping training centers for teachers and training school principals in leadership and management skills; constructing and making operational new schools; establishing computer classrooms in most secondary schools and in all vocational schools; designing and implementing exams and test standards; and developing and adopting an education reform strategy with the support of the World Bank and other donors.
- Public Financial Management has been somewhat strengthened with the establishment in 2012 of a macro-fiscal department within the Budget Directorate at the Ministry of Finance and the development of the conceptual framework for a multi-year budget planning process. A national debt management strategy has been developed and new Public Debt Directorate that assumed both analytical and operational functions, established.
- In response to an urgent request from the government, the World Bank, in close partnership with the UN and others, produced the ESIA in record time. The ESIA served to underpin the creation and launch of the International Support Group for Lebanon. This was a strong signal from the international community of the importance of Lebanon, and a sign of commitment to its security and stability. The World Bank subsequently worked with the government to put together a Roadmap of Priority Actions aimed at helping Lebanon weather the crisis, establishing an MDTF as a financing mechanism to channel donor contributions towards supporting projects identified in the Roadmap.
- Some key IFC results in Lebanon include: Around US$900 million in investments between FY12-13, largely in trade finance to support the Small and Medium Enterprises most affected by the difficult economic environment in the country; promoting greater Access to Finance for women-owned SMEs by working with the Central Bank of Lebanon Bank to develop a targeted approach to women-owned businesses The IFC and IBRD are collaborating to assist the Central Bank to assess the national payment system, explore related opportunities in the private sector, and promote Sustainable Energy Finance through IFC assistance to Banque Libano-Francaise to scale-up lending for Sustainable Energy Finance projects.
There is strong donor coordination to support Lebanon through local donor coordination and the International Support Group. Below is a non-exhaustive list of coordination in various areas.
- Water Sector: Kuwait Fund for Arab Economic Development, Islamic Development Bank
- Energy Sector, Cultural Heritage and Urban Development Sector: Agence Française de Développement, Italian Government
- Urban Transport Sector: Arab Fund for Economic and Social Development, Abu Dhabi Fund for Development, Islamic Development Bank
- Social Protection Sector: Canadian International Development Agency, Italian Cooperation
- Impact of the Syrian Crisis on Lebanon: UN Agencies, Bilateral Partners, European Union
- National Poverty Targeting Program: World Food Program, United Nations High Commissioner for Refugees