IMF and World Bank Condition Reconstruction Aid for Lebanon on Normalization Efforts

The IMF and World Bank are making reconstruction funds for Lebanon conditional on normalization with Israel and Hezbollah’s disarmament. This follows recent discussions highlighting the necessary reforms for financial aid. U.S. officials also suggest Lebanon may have opportunities to join normalization agreements, while local resistance efforts attempt to finance reconstruction amid pressures that inhibit their capabilities.

The International Monetary Fund (IMF) and World Bank are reportedly conditioning reconstruction funds for Lebanon on the normalization of relations with Israel and the disarmament of Hezbollah. This was revealed in discussions between Wassim Mansouri, acting governor of Banque du Liban, and IMF Managing Director Kristalina Georgieva. Specific steps and objectives with designated timelines will be essential for Lebanon to secure aid from these institutions and donor countries.

U.S. special envoy to West Asia, Steve Witkoff, has expressed optimism about Lebanon and Syria potentially joining a normalization agreement with Israel. He stated, “Lebanon, by the way, could actually mobilize and come into the Abraham Peace Accords, as could potentially Syria. So, so many profound changes are happening,” during an event in Washington.

Previously, the IMF and Lebanon had reached an agreement in 2022 for a four-year Extended Fund Facility (EFF) worth approximately $3 billion, contingent upon comprehensive financial sector reforms. However, this agreement has stalled amid ongoing crises and persistent corruption within Lebanon.

Moreover, Lebanese Finance Minister Yassin Jaber has indicated that the World Bank is preparing a preliminary plan for a $1 billion reconstruction endeavor to address infrastructure recovery and debris removal following the recent conflict. This initiative includes an initial $250 million commitment for Beirut.

Al-Akhbar has reported that World Bank representatives have urged for expedited approval of funding procedures, which are tied to political and financial reform conditions imposed by Western entities. Additionally, the European Union has stipulated that Lebanon restructure its banking system to access a €500 million aid package linked to a 2024 agreement aimed at managing refugee flows into Europe.

The current estimate for Lebanon’s reconstruction costs post-conflict ranges between $6 to $7 billion. Accordingly, most reconstruction financing has come from local resistance efforts, with Hezbollah reportedly allocating around $650 million towards housing and restoration projects. However, U.S. pressures have frequently obstructed Hezbollah’s funding capabilities.

In summary, the IMF and World Bank have made Lebanon’s access to reconstruction funds contingent upon normalization with Israel and the disarmament of Hezbollah. Despite previous agreements, financial aid remains hindered by ongoing crises, corruption, and Western conditioning of reforms. The reconstruction needs of Lebanon are substantial, with local entities like Hezbollah struggling against external pressures to facilitate funding for recovery efforts.

Original Source: thecradle.co