Lebanon’s electricity reform should be a top priority for the government to prove it is capable of resolving decades of state mismanagement, the regional director of the World Bank said.
Saroj Kumar Jha said Lebanon’s current fiscal problems and piles of national debt relate to the mismanagement of the electricity sector.
“You see that Lebanon's fiscal problem today is because of the electricity sector. A large part of your debt is coming from the electricity sector – if you continue to subsidize BDL [Bank du Liban] with $2 billion or an average every year – money that you don’t have - this is where the real issue is.”
“So let's take one sector, fix it,” Jha said, while urging for action from involved parties.
Lebanon’s state-run electricity company, Electricite du Liban, has for decades failed to supply households with 24-hour electricity, and for some the business symbolizes the corruption and mismanagement at the core of the ruling class.
As the country’s economic crisis takes a deeper dive, the state’s inefficiencies have had a devastating impact on daily life. Citizens have been facing frequent power blackouts, in some areas leaving households with just four hours of electricity a day.
The World Bank would support a reform program on the electricity sector, Jha revealed, as he appealed to the country’s stakeholders to work for “the next 12 months on the electricity sector.”
One of the key implementations of a shake-up in the industry would be an independent regulator – something that ministers have traditionally kept out of departments, but one of the demands from the French, who have been pushing the government to reform.
“You can go big time on solar and wind, you can go big on renewable energy, you can clean up the sector, focus on governance, and independent regulator,” while attracting private investors, Jha said.
He stressed that an overhaul of the sector was achievable and the wider ramifications would be felt through job creation and investment, while reducing the fiscal deficit.
Jha’s comments came during a panel session on Lebanon convened by the SDG Media Zone, where he answered a question, among others, on how the government can demonstrate reforms as demanded by the World Bank, France and the US. The full session will be broadcast next week.
Lebanon has been sinking under the weight of its worst economic crisis in 30 years, which has been compounded by the COVID-19 pandemic and the catastrophic explosion in Beirut last August that caused an estimated $15 billion worth of damage to the city.
International partners, including the World Bank, France, the US and Gulf allies have offered to aid Lebanon financially but only if the government implements state sector reforms to deter corruption and cronyism that many Lebanese blame for today’s crisis.
Last month, the World Bank declared Lebanon’s economic crisis likely to rank “in the top ten, possibly top three, most severe crises episodes globally since the mid-nineteenth century.”
On top of this damning report, over seven months ago the group named the crisis a “deliberate depression,” but it failed to rile politicians into action.
Jha explained that the World Bank uses three criteria to establish the level of crisis inflicting a country; economic and financial crisis, human dimension, and social dimension.
The alarming deprivation of the latter two is what led the World Bank to place Lebanon’s crisis as one of the possible top three globally since the mid-19th century.
Beginning with the human dimension, Jha pointed to the fall in the quality of the education sector, which he titled a “learning crisis.”
“In my view this crisis is the mother of all crises because this is going to impact Lebanon’s future generation, and therefore we are very concerned about the deteriorating education quality, our schools and our educational institutions in the country,” Jha said.
A report published by UNICEF Thursday detailed similar concern over the plight of Lebanon’s children, who are “bearing the brunt” of the sinking social conditions.
Jha also sounded the alarm over the levels of poverty and social deprivation that have arisen over the last eighteen months.
Lebanon, once a middle-income country, now has 77 percent of households without enough food or enough money to buy food, UNICEF said.
“Lebanon has never seen this level of deprivation, distress and poverty and the social dimension of this crisis to us seems a huge paradox in a country which has tremendous human potential, tremendous talent, very enterprising people but sheer lack of governance,” Jha explained.
But the crowning factor that cemented Lebanon’s position as heralding one of the worst economic crises in modern history was the “prevalence of corruption in every sector,” Jha said.
“The reason why Lebanon is likely to be in the top three, if not in the top ten as the worst economic and financial crisis is because of the lack of any policy action whatsoever of those who were responsible for taking policy action.”
