No end in sight for Lebanon’s economic woes
12 June 2023
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Experts remain pessimistic about the outlook for Lebanon’s economy as the crisis continues to worsen more than three years after it began in 2019.
The country only has a caretaker government and no president – and it is hard to see how it will implement the reforms the IMF says are needed.
On 8 June, IMF spokesperson Julie Kozack said: “Lebanon needs urgent action to implement a comprehensive economic reform programme to arrest the severe and deepening crisis and to allow Lebanon’s economy to recover.”
She added that the IMF was concerned that delays in implementing key reforms were keeping the economy severely depressed.
“We are concerned about irreversible consequences for the economy, especially for the poor citizens of Lebanon and the middle class,” she said.
Lebanon’s currency has weakened dramatically since the start of the country’s economic crisis, plunging much of the population into poverty.
In March, the Lebanese pound, officially pegged at 15,000 to the dollar, was trading at 100,000 against the dollar on the country’s parallel market, down from 1,507 before the economic crisis hit in 2019.
In May, a World Bank report stated: “The systemic failure of Lebanon’s banking system and the collapse of the currency have resulted in a large, dollarised cash-based economy.
“It not only threatens to compromise the effectiveness of fiscal and monetary policy, but also heightens the risk of money laundering, increases informality and prompts further tax evasion.”
In April 2020, the Lebanese government agreed with IMF staff to implement a series of reforms to end the crisis, but very few have been executed.
This is mainly due to the country’s ongoing political deadlock.
Lebanon has had no head of state since President Michel Aoun’s term ended at the end of October 2022, worsening the country’s political paralysis at a time when important policy decisions are needed to get the economy back on track.
According to the IMF, the economic outlook for Lebanon is highly uncertain and depends on policy actions taken by the authorities to carry out the agreed reforms.
Kozack said: “Timely implementation of these reforms is critical to end the current crisis and prevent a further deterioration in living standards of the people of Lebanon.”
She added: “Lebanon will need strong financial support from the broader international community and the financial needs of Lebanon over the next several years are very large given the magnitude of the economic crisis.”
Bailout prospects
While the IMF has said that Lebanon will need significant financial support from other countries to help it get through its economic crisis, it is unclear where that support will come from.
Nicholas Blanford, a non-resident senior fellow with the Atlantic Council’s Middle East programmes, says it is unlikely that Saudi Arabia will be willing to bail the country out financially as it has done in the past.
He said: “Saudi Arabia has pumped billions of dollars into Lebanon over the years, including helping with the reconstruction programme in the 1990s after the civil war. Saudi has also helped Lebanon financially through various economic slumps.”
The change of leadership in Saudi Arabia when King Salman came to the throne in 2015 led to a change in policy regarding financial bailouts for Lebanon, according to Blanford.
“It seems like Saudi feels that it got very little in return for its past investment in Lebanon due to the fact that Hezbollah remains a dominant force in the country politically and militarily.
“The Americans and the French have, for several years, been pressing the Saudis to show more interest in Lebanon as a pushback against Iranian influence, but, so far, they haven’t shown much interest.”
The Lebanese are keeping their fingers crossed that economically viable quantities of oil and gas are found, but there is also a huge amount of scepticism given the state of the political system here and the nature of the politicians
Nicholas Blanford, Atlantic Council’s Middle East programmes
In October last year, Lebanon and Israel agreed a deal to end a long-running maritime border dispute in the Mediterranean Sea, clearing the way for increased oil and gas exploration activity in Lebanese waters.
Following the deal, in May this year, it was announced that a consortium led by France’s TotalEnergies would start drilling for oil and gas off the country's coast at the beginning of September.
While it is possible that new hydrocarbon discoveries in Lebanese waters could help ease the country’s economic problems over the long term, it is doubtful that this would provide any benefit in the short term, according to Blanford.
“The Lebanese are keeping their fingers crossed that economically viable quantities of oil and gas are found, but there is also a huge amount of scepticism given the state of the political system here and the nature of the politicians themselves.”
Blanford believes that many Lebanese citizens are worried that if commercially viable quantities of hydrocarbons are found, they are ultimately only likely to benefit the country’s oligarchs rather than the general public.
Due to the wide range of severe political and economic problems that Lebanon faces, there is unlikely to be any improvement over the coming months unless common ground is found between the country’s rival political blocs.
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Saudi Arabia’s Royal Commission for Riyadh City (RCRC) is preparing to implement a 189-kilometre (km) programme of road upgrades and extensions in the north of the capital as part of a comprehensive restructuring of the capital’s northern transport infrastructure.
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Package 2: Covers 28km of core alignment updates across King Salman Road, the Expo South link, Airport Road, Prince Badr Bin Abdulmohsen Road and Anas Bin Malik Road.
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Wave two comprises two further packages totalling 72km that extend the network west and south of the airport.
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Package 4: Covers 34km and comprises the extension of King Salman Road to Al-Janadriyah Road, the 10km upgrade of the Airport Extension Road serving the airport support functions and the 16km upgrade of Prince Saud Bin Abdullah Bin Jalawi Road.
Design is scheduled for submission in March 2027.
Wave three
Wave three is a single 52km package covering the outer northern and eastern corridors. It comprises the 11km upgrade of Al-Thumamah Road, the 17km upgrade of Khuzam Road and the 19km extension of Jabal Azid Road, with design due for submission in August 2027.
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All three waves are scheduled to reach tender by 2028.
Programme rationale
Designed by Lebanon-headquartered engineering firm Dar Al-Handasah, Taiwan’s Wiecon Consulting Engineers and Germany’s Bodeker, the programme responds to the concentration of Riyadh’s flagship schemes on the city’s northern edge.
Riyadh is planning major developments in the north, with most due for completion by 2030. Daily trips in the area are forecast to rise from about 775,000 today to 1.7 million by 2030 and 3.7 million by 2050.
Roshn’s projects account for 37% of that demand, with Roshn Sedra alone generating more than 520,000 daily trips by 2030.
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The later waves then build capacity for the housing, logistics and mixed-use districts expected to drive traffic growth after 2030, sustaining a pipeline of road contracts in the capital well into the next decade.
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