France and UN arrange second donor conference for Lebanon

The event aims at assessing humanitarian needs since the deadly explosion at Beirut's port

People hold placards during a protest by parents of students studying abroad in front of Lebanon's Central bank in Beirut, Lebanon November 18, 2020. Picture taken November 18, 2020. Reuters

France and the United Nations will co-host on Wednesday their second conference to help rebuild the Lebanese capital after a deadly explosion at the port in early August.

Initially planned for October, the conference has been delayed by over a month and will focus on assessing the results of a first humanitarian conference that took place on August 9, five days after the blast killed 205 people and injured thousands.

"France has not lost interest in Lebanon and wants to follow up on the aid that was announced by the international community during the August 9 humanitarian conference and conduct a first assessment" a French source told The National.

Around $300 million, including $50 million from France, have been disbursed or assigned up to now, according to a source involved in the conference.

The aim of Wednesday’s conference is to “understand what sectors of Lebanese society still need help to better direct humanitarian aid over the next weeks and months, including support to small businesses and the emergency rehabilitation of key infrastructure like water supply and sanitation,” said the source. “This is not a reconstruction conference.”

French President Emmanuel Macron visited Lebanon twice after the blast. He called for funds to be sent “directly to the Lebanese people” instead of transiting via the Lebanese government, which is accused of corruption.

On September 1, Mr Macron announced that a conference would take place in the second half of October, but it was later pushed back to December 2.

During his visits to Lebanon, the French President also tried to pressure Lebanese politicians to respond to the IMF’s demands as part of negotiations to save the small Mediterranean country’s imploding economy.

The Lebanese government asked for IMF support in May this year after defaulting on its debt for the first time in its history.

But in exchange, the IMF made several requests, including that Lebanese lawmakers legislate to formalise the capital controls that banks implemented in November 2019 and audit key institutions such as the central bank.

Lebanese politicians promised Mr Macron that they would follow-up on these demands but have yet failed to do so, blaming each other instead for stalling reforms.

Lebanon has been without a fully functioning government since Prime Minister Hassan Diab resigned on August 11 after the Beirut tragedy.

On September 1, Mr Macron warned that if a new government was not formed within two weeks and if reforms were stalled, France would “draw the necessary conclusions – that of a misunderstanding.”

The audit of the central bank recently drew scrutiny after international audit company Alvarez & Marsal withdrew from the forensic aspect of the audit because the bank failed to deliver the necessary documents, citing Lebanon’s banking secrecy law.

The contract for the audit was signed on August 31 between the Finance Ministry and three firms, including Alvarez & Marsal.

Last Friday, Lebanese lawmakers gathered on the request of President Michel Aoun. “Auditing is necessary so that Lebanon is not considered a rogue or failed state in the eyes of the international community” he wrote in a letter to Parliament.

MPs issued a recommendation that the audit of the BDL and any other state institutions should not be covered by Lebanon’s banking secrecy law.

“This is great as a declaration,” MP Yassine Jaber said after the session, “but the problem in Lebanon is always implementation.”

MP Georges Adwan said that Parliament will pass the decision into law should BDL refuse to follow their recommendation.

“In this case we will go with a further step to vote the decision into a law,” he told journalists.

Mr Adwan said that Lebanon will need to sign a new contract for the forensic audit.

But Parliament’s recommendation is not legally binding and government critics doubt it will have any effect despite Parliament Speaker Nabih Berri describing Friday’s meeting as “a fateful session”.

“It’s a charade,” Sami Atallah, director of the Lebanese Centre for Policy Studies, told The National. “I don’t know if they’re trying to fool the international community, but I can’t imagine that it will work”.

Lebanese politicians, who are widely accused of profiting from a weak state for personal enrichment, have no interest in transparency, said Dr Atallah.

“They have either benefited from the system or failed to hold accountable those who benefited,” he said.

Meanwhile, the central bank’s reserves are running low. Its governor has warned multiple times that it will not be able to continue subsidising key imports, raising worries of social unrest. Over half the Lebanese have been pushed into poverty in the past year.

Last Wednesday, Reuters reported that the central bank was studying lowering the threshold for obligatory foreign exchange reserves to delay the cessation of subsidies.

“Lebanese politicians are saying: we do not have the money, and the IMF won’t come to us as long as we don’t come clean, so we’ll milk the cow that we have,” said Dr Atallah. “They’re trying to preserve the interest of the central bank and the banking sector at the expense of everyone else.”

“This is just a ticking bomb. They’re living on borrowed time,” he warned.