Lebanon's cabinet gives green light to electricity system overhaul

Plan seeks to end decades of chronic power shortages and drain on exchequer

A Turkish floating power station, docked near the Jiyeh power plant south of Beirut, has been helping to ease Labanon's power shortage. AP Photo

Lebanon's government on Monday approved a plan to reform its electricity sector, vowing to provide power 24 hours a day from a grid notorious for blackouts.

The decision is the most significant by the cabinet since it was formed in late January and is a step towards unlocking billions in aid pledged to Lebanon in exchange for slashing public spending and overhauling the electricity sector.

Prime Minister Saad Hariri said the cabinet unanimously approved the plan which would improve power supply, raise electricity tariffs and reduce the fiscal deficit resulting from government transfers to state-run Electricite du Liban (EDL).

"This plan satisfies the Lebanese people because it will bring them electricity 24/7," he told reporters after the cabinet session.

"It will also reduce the budget deficit," he said.

Mr Hariri said implementation of the plan was "urgent" and "could not be delayed" because it was critical to Lebanon's economy.

Energy Minister Nada Boustani, who first presented the plan last month, described the cabinet's approval as a "positive step".

The plan still needs to be approved by parliament.

A dated electricity grid, rampant corruption and lack of reform has left power supply lagging way behind rising demand since Lebanon's 1975-1990 civil war.

According to the McKinsey & Company consulting firm, the quality of Lebanon's electricity supply in 2017-2018 was the fourth worst in the world after Haiti, Nigeria and Yemen.

Government subsidies to state-run EDL have also worsened the cash-strapped government's budget.

EDL receives one of the largest slices of the government's budget after debt servicing and salaries.

According to the World Bank, government transfers to EDL averaged 3.8 per cent of gross domestic product from 2008 to 2017, amounting to about half of Lebanon's fiscal deficit.

Lebanon is one of the world's most indebted countries, with public debt estimated at 141 percent of GDP in 2018, according to credit ratings agency Moody's.

A conference dubbed CEDRE in the French capital in April pledged aid worth $11 billion (Dh40.4bn), promising to stave off an economic crisis.

At the Paris conference, Lebanon committed to reforms including slashing public spending and overhauling the electricity sector.

In exchange, the international community has pledged major aid and loans, mostly for infrastructure projects that need to be signed off by the new government.