Lebanon must implement 'credible' reforms after $4.6bn explosion toll, World Bank says
Losses including changes in economic flows are estimated to be between $2.9bn and $3.5bn
The devastating explosion that rocked the Lebanese capital this month caused up to $4.6 billion (Dh16.88bn) in damage to infrastructure and physical assets in Beirut, the World Bank said.
Losses including changes in economic flows on the back of a decline in output in several economic sectors are estimated to be in the range of $2.9bn to $3.5bn, the World Bank said in its Rapid Damage and Needs Assessment (RDNA) report released on Monday.
Public sector reconstruction and recovery needs for this year and 2021 are in the range of US$1.8bn and $2.2bn, according to the report, which was conducted in cooperation with the United Nations and the European Union. Lebanese ministries, civil society organisations and other key stakeholders also contributed to the report, which the World Bank said, will help guide the urgently needed global response.
In the immediate term, Lebanon needs up to $760 million until December 2020, and between $1.18bn and $1.46bn in 2021 to address its most pressing needs in the aftermath of the explosion.
The most severely affected sectors of the economy are housing, transport and tangible and intangible cultural assets – religious and archaeological sites, national monuments, theatres, archives, libraries and monuments, according to the report's findings. The transport sector’s needs are the highest, followed by culture and housing.
“Although its estimates are preliminary due to the rapid nature of the assessment that was carried out … under challenging circumstances, the RDNA lays the groundwork for an agenda for reform, recovery, and reconstruction,” the World Bank said.
“The three main economic effects of the explosion are: losses in economic activity caused by the destruction of physical capital; trade disruptions; and losses in fiscal revenues for the government.”
In terms of critical recovery, the World Bank said, Lebanon needs up to $40m in the next three months alone for an immediate “large-scale cash transfer to meet the basic needs of 90,000 affected individuals, and to create short-term jobs for 15,000 individuals”.
Immediate housing needs are estimated at up to $35m, while up to $275m in financial support is needed to restore services of 5,200 micro businesses and 4,800 small companies that employ thousands of Lebanese.
The World Bank estimates are in line with consultancy Strategy&’s $5bn damage assessment to infrastructure and physical assets. The departing Lebanese government has previously estimated the impact of the explosion, which left 300,000 people homeless, to be as high as $15bn.
The caretaker government estimates 190 people have been killed and more than 6,500 injured by the Beirut port explosion, while 50,000 houses, nine major hospitals and 178 schools sustained damage.
Lebanon is facing its worst economic crisis since its independence in 1943 and the Beirut port explosion has compounded its economic woes. Pre-explosion projections of 2020 real gross domestic product contraction were well into the double digits, driven by months of political and financial crisis that led to mass protests.
The Institute of International Finance estimates that Lebanon’s economy will shrink 24 per cent this year, compared with an earlier forecast of 15 per cent as a result of the blast.
Lebanon defaulted on eurobonds worth $31bn in March, which led its currency – pegged to the US dollar since 1997 – to lose more than 80 per cent of its value against the greenback in the black market. The inflation rate in Lebanon in July rose 112.4 per cent, compared with under 90 per cent in June, according to official data.
“Given Lebanon’s state of insolvency and lack of sufficient foreign exchange reserves, international aid and private investment will be essential for comprehensive recovery and reconstruction,” the World Bank said on Monday.
“Lebanon’s implementation of a credible reform agenda will be key to accessing international development assistance and to unlock external and private sector sources of financing.”
Updated: August 31, 2020 06:50 PM