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Lebanon: reconstruction or destruction?

Having secured more than $11bn in international loans and grants, the Beirut government is hoping its economic plans aren't blown away by another war

There was a general feeling of satisfaction when the recent Lebanon donors' conference in Paris came to an end. The Lebanese government had received international promises of $11.5bn to boost the ailing economy and rebuild the country's infrastructure, crumbling after decades of warfare and neglect.

Prime Minister Saad Hariri praised the global community for its "clear and concrete indication of support". French President Emmanuel Macron spoke of the "unprecedented mobilisation" on Lebanon's behalf.

"At a time when the Levant probably lives one of the worst moments of its history," Macron went on, "it's more important than ever to preserve the most precious asset: a peaceful, diverse and harmonious Lebanon."

But how long will Lebanon remain peaceful? Hariri reminded delegates to the Paris conference that his country was small and faced "enormous political, economic and security challenges, and these challenges are exacerbated by the war in Syria and the crisis of displaced Syrians in Lebanon". Around 1.5 million Syrians are now sheltering there.

The refugee presence is putting a huge extra strain on all aspects of life. As Capital Economics, a consultancy, says in a recent report, the Lebanese economy has been "hit hard by the spillovers" from the Syria conflict, and "there is no sign of an imminent solution. Accordingly, exports and investment will continue to struggle".

More alarmingly, Lebanon is well aware that it's caught up against its will in the wider regional dispute that pits Saudi Arabia and its Sunni Arab allies against Iran and the Shia militias it supports. The "bigger threat for Lebanon", in the view of Capital Economics, "is that it becomes the centre-ground of a new proxy war between Saudi Arabia and Iran. When tensions flared up last year, Lebanon experienced a bout of capital flight."

The report adds that a "sustained period of capital outflows could ultimately force the [Lebanese] pound to be devalued, in turn creating problems for the government in servicing its large foreign currency debts".

The possibility of further capital flight isn't something the Lebanese government wants to contemplate, having garnered substantial financial support for repairing and rebuilding the country's infrastructure. This success followed the awarding of two offshore exploration blocks to a consortium comprising Total, Eni and Novatek.

But as long as the Syria war continues and Iran and Saudi Arabia remain at loggerheads, Lebanon and the whole of the Levant will be forced to live from one day to the next in a state of nervous uncertainty. Keeping Lebanon peaceful, diverse and harmonious under these circumstances won't be easy.

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