Lebanon has not done enough to enact economic reforms, its Finance Ministry cited a World Bank official as saying on Friday, pointing to the impending challenge of bringing its massive debt under control.
“These reforms, despite having started, do not rise to the expected level and this is what we have said with all frankness to the Lebanese government,” said World Bank MENA vice president Ferid Belhaj, according to a Finance Ministry statement.
The bank and other international lenders helped arrange pledges of $11 billion in soft loans and aid at a conference in Paris a year ago to build new infrastructure, but said the money depended on reforms.
The government agreed to the proposed reforms, including big cuts in deficit spending, but it was not able to act for much of last year because of political wrangling after May’s election.
Prime Minister Sa’ad Al Hariri’s new coalition government started working last month, pledging to enact the reforms swiftly. However, it has not yet passed a budget for 2019 or any of the promised changes.
Hariri, who returned to Lebanon on Thursday after a “precautionary” heart operation in Paris, has pledged to reduce the budget deficit as a proportion of gross domestic product (GDP) by 5 per cent over five years.
Lebanon has one of the world’s largest public debt burdens, equivalent to about 150 per cent of GDP.
Last week, Finance Minister Ali Hassan Khalil issued a circular, seen by Reuters, ordering government departments to freeze new spending on everything except salaries and transport costs.
The World Bank has said the most urgent reforms needed are to the electricity sector, which has been unable to provide 24-hour electricity for decades.
Because the power plants use expensive fuel oil and consumer tariffs are low, the state spends $1 billion-1.5 billion a year subsidising the sector, the government said last year.
A plan to improve service and reduce state spending on electricity by installing more efficient generators is being reviewed by the cabinet.