The World Bank calls on Lebanon to take “urgent measures” after wasting valuable time

Lebanon suffers from severe economic and financial crisis (Anatolia)

The World Bank Group changed its strategy to support Lebanon’s emergency needs in the face of serious social and economic challenges and continuing political instability, and called on it to take urgent action after what it considered a “precious time”, messed up.

In a statement issued and published on its website, the Bank announced today, Monday, that on May 20, the Executive Board approved the performance review report and lessons learned for the Strategic Partnership Framework, outlining the progress made with implementation during the 2017 -2022 fiscal years, and revise its objectives. At a time when Lebanon is witnessing one of the most serious economic and financial crises in modern history.

The Achievement and Lessons Learned Review report also extends the implementation period of the Strategic Partnership Framework by an additional year (during fiscal year 2023), to promote much-needed social and economic recovery programs targeting the poorest and most vulnerable, and to pave the way supporting macroeconomic and structural reforms that have become necessary to save the country.

During the implementation of the Partnership Framework, the Bank says that Lebanon has been hit by a number of aggravating and intertwined crises: a severe economic and financial crisis, the Corona pandemic, the explosion of the port of Beirut, and most recently a food security crisis due to the war in Ukraine.

According to the World Bank’s analysis, nominal GDP fell from almost $ 52 billion in 2019 to an expected level of $ 21.8 billion in 2021, registering a 58.1% contraction.

He said that “in the face of political inaction, the unresolved crises have caused long-term damage to the Lebanese economy and society: basic public services are collapsing, unemployment rates are rising sharply and human capital is severely depleted.”

He continued, “The private sector is being severely hampered by the paralysis of the financial system. Low corporate productivity and revenue generation rates have led to widespread retrenchments and bankruptcies. If policy reform continues, real GDP is expected to reach 6.5 by 2022. % shrink. “.

Strategic Partnership Framework Update

In these conditions of a weakening economy and an uncertain political environment, the Bank in its Performance Review and Lessons Learned report updated the Strategic Partnership Framework to make it more people-centered, with greater selectivity in a narrow set of sectors directly benefit. the poor The most needy, including the refugees, and the construction of the basic elements of a reform program. The Achievement and Lessons Learned Review report reviews the priority areas of the Strategic Partnership Framework and its results framework.

This amendment aims to strengthen responses to crises, mitigate their social and economic impact, and consolidate key elements to address the structural challenges inherent in the field of governance and the economic model.

He believed that the progress made in achieving the objectives of the Strategic Partnership Framework was modest in several areas, given the prevailing managerial challenges and deliberate political reluctance on the part of the political class. In response to these emerging priorities and needs, the World Bank has restructured and rescheduled its portfolio by eliminating underperforming projects and allocating resources to newly identified priorities through a response focused on relief, recovery and resilience.

These include providing emergency assistance to combat the Corona pandemic to equip hospitals to provide urgent care and distribute antivirus vaccines, a program of cash transfers aimed at helping the poorest and most vulnerable families, support for small and medium-sized enterprises affected by the pandemic and explosion of the port of Beirut, and a voucher program to support smallholder farmers to continue agricultural production, and an emergency food security project to ensure the availability and accessibility of food grains by poor and needy groups, including refugees, to ensure.

The World Bank has also relied on its close relations with the donor community, and in close coordination with the United Nations and the European Union, to conduct a rapid damage and needs assessment (RDNA) in the wake of the Beirut port explosion. , and to determine. the Lebanon Reform, Reconstruction and Reconstruction Framework (3RF).

This was followed by the establishment of the Lebanon Trust Fund (LFF), a multi-donor trust fund, to channel financial support to implement the priorities of the Reform, Reconstruction and Reconstruction Framework.

The Fund has already launched several initiatives and projects to address the recovery needs of micro and small enterprises, the social recovery needs of the affected population groups, the reconstruction of housing and the rehabilitation of cultural and creative industries in the affected neighborhoods, and recent initiatives. for solid waste management and environmental recycling activities in the areas affected by the explosion.

The performance review and lessons learned report also seeks to learn from implementation experience to improve implementation levels of the existing portfolio of operations and the quality of potential new projects. Among the most important lessons learned are the need to support the delivery of basic services, the acceptance of flexibility in project design, the strengthening of coordination between relevant agencies for the implementation of reforms, the building of strong partnerships, the rebuilding of the social contract through accountability and oversight of priority reforms, the institutionalization of decentralized implementation. mechanisms, and strengthening the role of third parties for monitoring and control in project implementation.

Lebanon wastes valuable time despite early warnings

Saroj Kumar Jah, Regional Director of the Mashreq Department at the World Bank, commented on this: “Despite the early warnings, Lebanon has wasted valuable time and many opportunities to follow a path to reform its economic and financial system. costs of lack of action are enormous, not only on the daily lives of civilians but also the future of the Lebanese people Two and a half years after the crisis, Lebanon has not yet started implementing a comprehensive program of reform and recovery to prevent the country from further drowning.The continued deliberate delay in addressing the causes of the crisis poses a threat, not at the level Not only socially and economically, but also the risk of a systematic failure of state institutions and which exposes the fragile social peace to further pressure.

The performance review and lessons learned report is based on the Lebanon Systematic Diagnostics, recent issues of the Lebanon Economic Monitor report, and the recent risk and resilience assessment. The report also benefited from extensive consultations with various stakeholders, including government agencies, representatives of civil society, the private sector and the international community.

The main obstacles to development in Lebanon

The report pointed out that the main obstacles to development in Lebanon, identified in the Systematic Diagnostic Study for Lebanon, still exist, namely the takeover of power by the elite under the guise of sectarianism, and exposure to conflict and violence. These obstacles created a fragile and flawed political system, and a state incapable of isolating the political struggle from its ability to govern and exercise power.

Crisis management embodies the extent to which the capabilities of good governance systems have been eroded, as well as the political paralysis created by elite hegemony. In this context, the Performance Review and Lessons Learned Report are based on three potential scenarios in which a new political settlement may emerge, namely political stalemate, minimal consensus, and political transition. Each scenario sets a different set of constraints, constraints, and opportunities for the development of the World Bank’s work program.

In line with previous calls, Lebanon needs to adopt a credible plan for a comprehensive and equitable recovery in the next phase, in order to achieve overall financial stability, and to accelerate its implementation in order to to avoid total destruction of its social and economic networks, and to stop the irreparable losses in human capital.

As indicated in previous issues of the Lebanese Economic Monitor report, this strategy should be based on: (1) a new monetary policy framework that ensures the restoration of confidence and stability in the exchange rate; (ii) a debt restructuring program to create short-term fiscal space and medium-term debt sustainability; (3) a comprehensive restructuring of the financial sector in order to restore the ability of the banking sector to meet obligations; (iv) gradual and equitable fiscal consolidation in order to restore confidence in fiscal policy; (5) reforms aimed at promoting growth; and (6) strengthening means of social protection.

Despite the continuing deterioration of levels of governance in Lebanon during the implementation of the Strategic Partnership Framework, some positive institutional points were able to achieve a level of transparency and accountability in the provision of public services and the confidence of citizens.

Examples in this regard include Rafic Hariri University Hospital, and IMPACT, an information technology platform of the Central Inspectorate in Lebanon. In the future, building and strengthening institutional capabilities will be essential, requiring timely investment, training and financial support to support public administrations and achieve sustainable development.

Significant efforts are required to advance the governance reform agenda. This is crucial for the renewal of the social contract and the restoration of the broken relationship of trust between the citizen and the state, especially at this critical time. Some of the main areas at this level are the reform of the public procurement system, the reform of public financial management, the strengthening of the financial supervision of Parliament, and the independence of the judiciary.

Women’s rights still face legal, institutional and social barriers that reflect worrying levels of women’s exclusion from important and vital sectors. The performance review report and lessons learned have created a common focus on addressing economic opportunities, addressing barriers faced by women in the labor markets, and promoting women’s entrepreneurship. This will complement the programs and efforts already underway in the context of the Mashreq Women’s Empowerment Program.

While the World Bank continues to focus the resources of its operating portfolio on projects that directly contribute to saving lives, protecting the poor and needy, and preventing the collapse of basic services, it also said in a statement: a set of strategic and sectoral analytical studies to identify reforms aimed at stimulating recovery Reconstruction led by the private sector in Lebanon.

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