The International Finance Corporation is willing to provide Lebanon with $1 billion in investments and soft loans each year if the government starts executing fiscal reforms and allows the private sector take part in projects, an IFC official said Sunday.
“There is no shortage of funding. We have lot of funding for Lebanon,” Mouayed Makhlouf, IFC regional director for the Middle East and North Africa, told The Daily Star in an interview.
“What we need is action. If all goes well, IFC is willing to put $1 billion into Lebanon each year.”
A private financial arm of the World Bank, the IFC has granted Lebanese banks and some government institutions soft loans to finance small and medium-sized enterprises and trade.
“What we are looking for are reforms, reforms and reforms. If we see action on reforms then we will allocate $1 billion to Lebanon each year,” Makhlouf said.
The IFC also wants to see the private sector play a bigger role in infrastructure projects, especially in electricity, telecommunications and roads. Makhlouf added that the IFC could own a stake in future projects it decides to invest in.
The IFC already owns shares in couple of Lebanese banks after acquiring a percentage of the lenders’ capital. “We are not shy of becoming an investor. We do take the risk. It all depends on what the transaction needs. If there is an equity investment, we take this equity risk,” he said. The IFC also provides long-term soft loans to finance infrastructure investments in collaboration with the private sector. It has already signed a contract with the government expand Rafik Hariri International Airport.
Makhlouf said that the IFC was looking for partners from the private sector to finance the construction of two power plants in Lebanon.
He added that the IFC plays a role in facilitating cooperation between the private sector and the government.
“The public debt-to-GDP in Lebanon has become extremely high. It is the third-highest in the world. Lebanon and some Arab countries have come to the conclusion that the private sector should be more involved in infrastructure projects,” Makhlouf said.
He added that in the past, the World Bank used to provide lending to build power plants. “Today, this will not happen because this is what the private sector should do. By giving a loan to the public sector, we are increasing the public debt. We don’t want to do this,” he said.
Makhlouf added that the IFC has asked the Lebanese government to let it run the bidding process for finding a private company to build and operate the power plants.
“At the end of the day, the government will be the provider of the service. The company builds the power plant and sells electricity to the government,” Makhlouf noted.
Lebanese governments do not usually build the power plants in an efficient and transparent way, he added.
“Our objective is to maximize the profits of the government and not the private sector. When we run the bidding process we make sure that we get the lowest offer for the government,” he said.
The official argued that there were several ways to cut the deficit of state-owned Electricite du Liban. “Reducing government subsidies for electricity is one option, but this option can only be taken once Lebanon enjoys 24 hours of electricity a day,” Makhlouf said.
He added that if Lebanon operated power plants with liquefied natural gas instead of gasoil, operational costs would fall drastically.
“Private generator owners charge $0.40 per kilowatt and this is very expensive. But if EDL switches to LNG, the prices per kilowatt will probably reach $0.09,” he said.
He added that Prime Minister-designate Saad Hariri seemed interested in letting the private sector buy a stake in state-owned telecommunications services. “The private sector can run the telecom and cellular networks more efficiently and at a lower cost to consumers,” Makhlouf said.
The Daily Star