LEBANON: Technical assistance for the assessment for the need and viability of a credit enhancement facility
The Lebanese economy has long been facing an uncertain political environment and severely limited fiscal space. In 2020, at the government’s request, PPIAF began its support by identifying ways to mobilize finance for municipalities through a credit enhancement facility. However, during implementation, it was evident that municipalities were not ready to take advantage of a credit enhancement facility that would require a pipeline of projects and investor interest. Consequently, PPIAF’s scope of work shifted, and the activity was restructured to focus on the most immediate need of improving municipal finances. This included identifying sources from government transfers while exploring options for attracting private sector finance and expertise to support municipal service delivery. One key focus area was the Independent Municipal Fund (ImF), Lebanon’s fiscal transfer mechanism, on which many municipalities depend for funding their daily operations and capital investment needs.
The following activities were undertaken to address this problem:
- Developing a multi-year ImF critical path reform agenda
- Adopting a standardized operating manual for the ImF
- Creating an annual report format and model report
In addition, the PPIAF activity addressed public-private partnerships (PPPs). It funded a detailed study of Lebanon’s existing PPPs and the legal and regulatory framework in place. It also shared relevant international municipal PPP case studies and prepared a comprehensive report and action plan to enhance opportunities for Lebanon’s municipal PPPs to take root and expand over time. With this support, Lebanon’s High Council for Privatization and PPPs (HCPP) helped pass Lebanon’s first dedicated PPP law.
The prospects for future actions remain uncertain, largely due to the political uncertainty and dismal economic situation today. However, the PPIAF-supported outputs provide clear and simple guidance, actionable tools and resources for follow-up measures, and a well-sequenced action plan. This will help Lebanon identify opportunities for follow-on donor support.