News Middle East07 Sep 2020

Lebanon:Beirut explosion caused up to US$4.6bn in damages to infrastructure and physical assets -- World Bank

| 07 Sep 2020

The 4 August Beirut port explosion caused between $3.8bn and $4.6bn in damage to physical stock, while losses including changes in economic flows as a result of the decline in the output of the economic sectors are estimated to be in the range of $2.9bn and $3.5bn, according to preliminary estimates arising from a Rapid Damage and Needs Assessment (RDNA).

The assessment was conducted by the World Bank Group (WBG), in cooperation with the United Nations (UN) and the European Union (EU) in close partnership with Lebanese ministries, civil society organisations and other key stakeholders, the World Bank says in a statement.

The sectors most severely affected by the explosion are housing, transport, and tangible and intangible cultural assets (including religious and archaeological sites, national monuments, theaters, archives, libraries and monuments), according to the RDNA.

Public sector reconstruction and recovery needs for this year and the next are estimated in the range of $1.8bn and $2.2bn, with between $605m and $760m needed in the immediate term until December 2020, and between $1.18bn and $1.46bn in the short term for the year 2021. The transport sector’s needs are the highest, followed by culture and housing.

The three main economic effects of the explosion are: losses in economic activity caused by the destruction of physical capital; trade disruptions; and losses in fiscal revenues for the Government.

Even prior to the explosion, Lebanon was facing compounded crises with pre-explosion projections of 2020 real GDP growth well into the negative double digits, driven by the spillovers from the Syria conflict, whereby Lebanon continues to host the largest refugee per capita population in the world; a financial and economic crisis that includes an impaired financial sector, a currency crisis, very high inflation rates, a defaulting public sector; and the effects of the COVID-19 pandemic. The disaster will not only exacerbate the contraction in economic activity, but also worsen poverty rates, which were already at 45% of the population just prior to the explosion.

Critical recovery needs in the next three months alone include an estimated $35m to $40m for an immediate large-scale cash transfer to meet the basic needs of 90,000 affected individuals, and to create short term jobs for 15,000 individuals.

They also include provision of shelter for the most vulnerable displaced, low-income, and middle-income households; and repair of minimally and partially damaged housing for the lower income households. Immediate housing needs are estimated at between $30m and $35m, while short term needs for the year 2021 are estimated at between $190m and $230m.

In addition, $225m to $275m in financial support is needed immediately to restore services of 5,200 micro firms and 4,800 small businesses that employ thousands of Lebanese. These small business recovery grants and soft loans will cover reconstruction, equipment and working capital needs to reopen activities and retain workforce.

Building back a better Lebanon

The RDNA calls for building back a better Lebanon based on the principles of transparency, inclusion and accountability to meet the demands and aspirations of the Lebanese people.

Reconstruction efforts will require not only the rehabilitation and reconstruction of damaged buildings and infrastructure, but also the rebuilding of institutions and governance structures. In the port sector for instance, the report recommends that, beyond the emergency works needed to ensure Lebanon’s vital imports, the port is rebuilt in a holistic and modern way, better sited and sized, and governed by the most efficient and transparent practices.

Given Lebanon’s state of insolvency and lack of sufficient foreign exchange reserves, international aid and private investment will be essential for comprehensive recovery and reconstruction. Lebanon’s implementation of a credible reform agenda will be key to accessing international development assistance and to unlocking external and private sector sources of financing.

 

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