The IMF and World Bank intend to connect Lebanon’s reconstruction funding to “normalization” with Israel and Hezbollah’s disarmament. An agreement for $3 billion depends on significant reforms, which have yet to occur due to ongoing issues in Lebanon. Concurrently, the World Bank’s $1 billion reconstruction plan requires expedited approval linked to political reforms, while the EU conditions its aid on banking sector restructuring.
Recent reports indicate that the International Monetary Fund (IMF) and the World Bank propose linking reconstruction funding for Lebanon to the country’s engagement in “normalization” with Israel and the disarmament of Hezbollah. This information emerged from sources cited by the Lebanese newspaper Al-Akhbar, suggesting that Lebanon’s access to vital funding would hinge on specific, time-framed actions.
During a meeting between Wassim Mansouri, the acting governor of Banque du Liban, and Kristalina Georgieva, the IMF chief, concerns were raised regarding the prerequisites for financial support. These conditions are expected to reflect the political dynamics revolving around the notions of “normalization” and “disarmament.” Notably, U.S. envoy to West Asia, Steve Witkoff, noted that there is potential for Lebanon and Syria to join an Israel normalization agreement.
In 2022, the IMF established a staff-level agreement with Lebanon for a $3 billion Extended Fund Facility, which relies heavily on significant reforms within the country’s financial sector. However, this agreement has stagnated due to the pervasive crises and corruption in Lebanon. Furthermore, the World Bank has reportedly developed a preliminary $1 billion reconstruction plan aimed at restoring infrastructure in the aftermath of Israeli military actions, including an initial $250 million earmarked for Beirut.
To facilitate this plan, World Bank representatives have urged fast-tracking necessary procedures for approval by its Executive Board on March 25, with stipulations set by Western nations regarding financial and political reforms. Concurrently, the European Union has conditioned its aid to Lebanon on the restructuring of its banking system, delaying the release of a 500 million euro assistance package agreed upon in a 2024 deal. EU Commissioner Dubravka Suica emphasized that the restructuring of the banking sector and a solid agreement with the IMF are crucial preconditions for this assistance.
In light of the devastation caused by Israel’s military actions, it is estimated that Lebanon requires approximately $6 to $7 billion for comprehensive reconstruction. The Lebanese resistance, particularly Hezbollah, has provided a substantial portion of the reconstruction funding, with an estimated allocation of $650 million directed towards housing and restoration. However, U.S. pressure continues to inhibit Hezbollah’s capacity to distribute these funds efficiently.
The linkage of financial aid for Lebanon to political conditions such as normalization with Israel and Hezbollah’s disarmament raises significant challenges amid the country’s ongoing crises. As international financial institutions necessitate reform and the restructuring of the banking sector, Lebanon’s path to recovery remains complex and fraught with external pressures. Without meaningful reforms and compliance with international demands, the reconstruction efforts may face continued delays.
Original Source: thecradle.co
