Lebanon needs billions, but donors will shun its broken institutions

Urgent humanitarian aid for Lebanon pledged during a virtual conference on Sunday will be routed through UN agencies and international and local non-governmental organisations.

Donor countries declared that the €253 million raised will be “directly delivered to the Lebanese population” rather than a government accused of mismanagement and corruption by the public.

Chatham House regional expert Lina Khatib told CNN that "deep political change" was needed to prevent aid from getting into "wrong hands". Lebanon's politicians have failed to initiate reforms, prompting months of mass protests calling for the overthrow of the country's sectarian system of governance.

French president Emmanuel Macron organised the event to provide assistance for families of at least 163 killed, 6,000 wounded and 300,000 rendered homeless, hungry and jobless by the massive explosion last week of more than 2,000 tonnes of ammonium nitrate, which devastated Beirut's port and three nearby neighbourhoods.

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Short-term funding is meant to support healthcare, food, housing and education for the victims of the blast, the most powerful ever in war-ravaged and crisis-ridden Beirut.

Billions required

Humanitarian aid is not all that is needed. Lebanon requires a simultaneous, sustained infusion of billions of dollars to rescue its stricken economy, stem the downward spiral of its people into poverty, and prevent youth emigration.

A 2018 international group meeting in Paris promised $11 billion in loans and grants and the International Monetary Fund (IMF) has proposed $10 billion if the government implements a major reform programme and tackles corruption.

Over the past two years, Macron has repeatedly made this clear and, during the pledging conference, IMF director Kristalina Georgieva reiterated her warning that there will be no money unless all of Lebanon’s institutions enact reforms.

Lebanon needs an estimated $16 billion in medium-term-to-long-term finance to rebuild Beirut’s devastated port, through which 85-90 per cent of food and other essential goods were imported before the blast. More than 6,200 damaged and destroyed buildings, including the iconic 19th century Surcock palace museum in the Ashrafiya quarter, also require repair or reconstruction.

Once again, Lebanon faces a crushing dilemma. Donors can be expected to balk over dealing with politicians, corrupt civil servants who will have to approve plans and issue permits, and crony contractors with influence.

Prime minister Hassan Diab submitted the resignation of his seven-month government on Monday, although four previous cabinets bear most responsibility for the disaster.

Diab’s fall is a major blow to the entrenched political elite, which can no longer blame his “technocratic cabinet” for failing to stave off economic and financial ruin. Diab will stay on as caretaker with no capacity to take decisions until a new cabinet is formed. While this could take months, it could enable international donors to sideline the government while implementing essential projects without fear of corruption.

Its sidelining could either strengthen the elite’s resolve to resist change or exert pressure on it to negotiate a reform deal. Politicians could be expected to demand immunity from prosecution for corruption. This would be rejected by the Lebanese public, which demands accountability more vehemently than ever in the wake of the port debacle.