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World Bank puts on hold $246 million loan for Lebanon

A family pose for a photo at their home in Tripoli, July 1, 2020. REUTERS/Mohamed Azakir Amer al-Dahn stands with his wife Sultana at home in Tripoli

BEIRUT: The World Bank has asked caretaker government to clarify the modifications the social affairs minister will make on the $246 million loan to the needy families in Lebanon before releasing the funds, a source revealed Monday.

“Saroj Kumar Jha, the regional director for the Levant region, informed caretaker Finance Minister Ghazi Wazni that the World Bank wants clear answers on the modifications the government will make on the distribution of the soft loans to Lebanon’s needy families. It’s up to the World Bank to approve or disapprove the release of the fund based on the answers it will receive,” the source told The Daily Star.

“We discussed the large number of World Bank programs in Lebanon. We also discussed ways to start implementing a social safety net project for the emergency crisis that will benefit 200,000 families suffering from extreme poverty in Lebanon. We asked the Finance Minister to work with various government agencies to help start implementing it. Immediately,” Jha told reporters after meeting Wazni.

The World Bank said in a statement to The Daily Star that its delegation asked the minister of finance to work with all agencies to expedite action on various measures that need to be taken to meet the World Bank’s effectiveness and disbursements conditions for the Emergency Social Safety Net (ESSN) loan.

“These conditions pertain to a credible mechanism for the verification of the eligibility of beneficiaries, engaging the WFP for administering cash transfers, hiring an independent third party monitoring agency to ensure credible and transparent implementation of the ESSN project, among others. Following the WB’s letter to the Ministry of Finance asking the Government of Lebanon to disburse cash transfers in USD, it was confirmed that cash transfers would indeed be disbursed in dollars,” the statement added.

Lebanon and the World Bank Friday inked the $246 million loan agreement to buttress the country’s poverty and social safety net support program in January 2021.

Wazni, who signed the agreement on behalf of Lebanon, said the government would send the agreement to the Lebanese Parliament for approval.

The government and the Central Bank agreed on March 17 to disburse the World Bank’s $246 million cash assistance to poor families in fresh dollars instead of Lebanese pounds.

This information was disclosed in a letter by officials from the Wold Bank, European Union and United Nations to Wazni.

In this letter, the officials said that following a meeting with Wazni and Central Bank Gov. Riad Salameh on Feb. 22, a verbal agreement was reached to facilitate the disbursement of humanitarian and development assistance in hard currency as long as the current suboptimal multiple exchange rate situation persists and for countries who want to do so.

“We believe that this disbursement arrangement can preserve value to both beneficiaries and donors. We acknowledge that potential programmatic and protection concerns might arise in case of hard currency disbursement and would like to confirm our readiness to discuss with competent Lebanese authorities potential risks and the implementation of adequate mitigation measures,” the letter to Wazni said.

On March 12, Lebanon’s Parliament passed a law on a $246 million World Bank loan that will provide a social safety net for tens of thousands of the neediest families as Lebanon grapples with a crisis that has sent more than half the population under the poverty line.

Lebanon is in dire need of massive cash assistance from the international community to weather the negative impact of the total lifting of subsidies on all basic items.

Salameh informed the government that he will be forced to withhold most of the subsidy program at the end of May, stressing that he can’t use the remaining foreign currency reserves at BDL.

caretaker Prime Minister Hassan Diab revealed on May 4 that the cost for the subsidy card for Lebanese families would be $1.2 billion annually, stressing that it was up to the Parliament to find source of funding for the card.

“There is a clear reason why I went to Qatar and that is to ask our Qatari brothers for help in the cost of the ration card. Their response was positive but I do understand that they have to study our request first before making a final decision. The annual cost of the ration card would be around $1.2 billion,” Diab told The Daily Star.

He noted that Lebanon has been spending up to $7 billion a year on subsidies, including a total of $5 billion spent on subsidizing goods that benefit Lebanese families, noting that what the government was looking at was to lower that number to $1.2 billion for subsidies.

 

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