1. Excellences, Ladies and Gentlemen, on behalf of the Minister of Finance Mr. Ali
Hasan Khalil and the government of Lebanon, I would like to thank the World
Bank, the United Nations and the Islamic Development Bank for organizing this
event, and the Jordanian authorities for hosting it, and you all, Excellences, ladies
and gentlemen, for attending it.
SLIDE 2 - Facts
Before the beginning of the Syrian conflict, Lebanon was already suffering from
the consequences of its long war of 1975-1990 that claimed about two hundred
thousand killed and more than a hundred thousand handicapped, in addition to
the missing people and the enormous damages at all levels. We also faced two
very aggressive Israeli wars in 1996 and 2006 that claimed thousands of victims
and witnessed systematic demolition of Lebanon’s infrastructure. This situation,
among other factors, led to a very high public deficit and to very worrying debt
dynamics, and the Lebanese people continued to finance their needs and those of
refugees in Lebanon without relying on a significant external assistance, and
Lebanon never defaulted in any way to its obligations, whether toward creditors
or toward its humanitarian responsibilities, as Palestinian refugees have been
present in big numbers (more than 450,000) in Lebanon for a long time.
Despite the trauma that has not yet disappeared, we took our responsibilities on
our own, and, at the same time, we managed to keep the country afloat. Already
then, the international community could have avoided a lot of security issues all
over the world had it properly supported the displaced and the hostcommunities,
and had it accepted to fairly share the burden of the Palestinian tragedy.
Despite all of the above, when Syria’s bloody conflict began, Lebanon deliberately
wide-opened its borders to an immense flow of displaced, and has willingly
provided relief and services to all of them, despite the very difficult circumstances
the country was facing. And despite calls for closing borders from those who
feared another displaced-related conflict, or those who suspected some of the
displaced to be fighters, possibly smuggling weapons into Lebanon, or those who
simply wanted to avoid a very large disequilibrium between religious
communities, especially at a time when the whole region is divided along

2. sectarian lines, displaced were not denied access into Lebanon. They are free to
circulate on Lebanese soil, and no displaced camps were established.
SLIDE 3
In 2014, World Bank President Jim Yong Kim was among the first to visit Lebanon
for an onsite assessment, and to call on the international community for sizeable
support. He said the world should be grateful to Lebanon for what it is doing. But
until this day, the world has not yet responded in an appropriate manner.
SLIDE 4
I would like to note that our Syrian brothers are allowed to work, learn, and
benefit from all public services in Lebanon. In our public schools, we have
introduced a two-shift system to make sure that the displaced are not denied
schooling, and today, we have more Syrian students in public schools than
Lebanese students. Nevertheless, and despite huge efforts made by the
government of Lebanon, more than 220 thousand Syrian children between the
age of 6 and the age of 14 remain unschooled. We are committed to provide
courses at all levels, at school and university, in addition to all other basic needs.
Syrian workers have been very quickly absorbed into various sectors of the
economy despite the brutal slowdown that Lebanon is facing. In a few words,
displaced Syrians enjoy the same rights than the Lebanese in Lebanon. Host
communities have done everything they could to provide relief, and it is
remarkable to note that no clash has occurred at any point in time between the
displaced and their host communities, despite the fact that the displaced form a
very vulnerable community that could easily be manipulated, which is yet another
challenge to be monitored.
The reasons why it is critical to support Lebanon in an adequate and timely
manner are simple and straightforward: Our countries have nothing to do with
the Syrian war, and bear absolutely no responsibility in what is happening. We are
providing a global public good by hosting the displaced on behalf of the
international community. Alternatively, by closing our borders or by encouraging
them to leave, they will have to be taken care of elsewhere. This public good has

3. a cost. We are not really seeking support: We are just asking the international
community to foot the bill for what we incurred by carrying the burden alone on
its behalf, taking into consideration the past four years of enormous efforts.
If not, our countries run very high risks, with potential severe spillover effect.
Already on the institutional level in Lebanon, one direct implication of the Syrian
conflict has been the absence of a president for more too years, in addition to an
institutional stalemate at all levels. If our fiscal and economic situation continues
to deteriorate, the country could enter an instability zone with increased risks of
violence, triggering waves of displaced toward other countries. By helping
Lebanon, the world would be helping itself. By stabilizing Lebanon and Jordan,
you would increase long-term stability in the Middle-East, and avoid spillover
threats.
Now let us imagine a country where one person out of four is a displaced. Imagine
the whole Mexican population moving into the USA, as President Kim said. The
immediate implication is a per capita GDP that falls dramatically and significantly
lowers standards of living for all.
After four years through which the country has faced the seism on its own,
Lebanon had the highest displaced per capita country in the world with 232
displaced per 1000 inhabitants in 2014. Lebanon’s 2015 GDP growth, which was
initially projected to be 2% by the IMF, is estimated to be nil by the Lebanese
Central Bank. The economic loss in 2015 alone amounts to $5.6 billion due to the
displaced crisis, which represent 11.3% of GDP. The cumulative overall economic
loss from 2011 till 2015 amounts to more than $15 billion. Lebanon’s response to
the crisis includes trade and direct investment aspects that I will not emphasize
on today as I would like to focus on the impact.
SLIDE 5 SOCIAL AND ECONOMIC
On the labor market, unfair competition and sluggish growth due to the crisis
have placed more than 190,000 Lebanese into poverty, in addition to the existing
one million who were pushed deeper into poverty leading to an increase in the
overall poverty rate in Lebanon since 2011 from 28% to 34%. The unemployment

4. rate has doubled to more than 20%, one-third of the Lebanese youth are
unemployed representing a 50 percent rise since 2011, in a labor force estimated
to be 50 percent larger than pre-crisis according to the IMF in addition to an
increase in informality which brought downward pressure on wages. Host
communities’ desperation increases as they lose jobs and as they fail to compete
with Syrian labor, while they witness the deterioration of basic services and
utilities. If we keep in mind the local price inflation due to direct support to the
displaced that excludes host communities, they have yet another big problem to
deal with. Channeling money to displaced only triggers hostility, standards of
living, and access to public services.
SLIDE 6
SLIDE 7 FISCAL
Lebanon’s debt to GDP has risen for the first time in 8 years to 138% in 2015
knowing that it is already one of the highest in the world. Without the direct
impact of the Syrian crisis, it would have been at 122% at year end. This alone
translates into an extra burden of $600 million every year.
As oil prices are falling, and due to their strong correlation with remittances, we
have higher financing needs to face, a much higher deficit than projected without
Syria’s war impact. The bank deposits increased by only 3.72% between January
1st and November 30, 2015 according to the Central Bank of Lebanon, compared
to 12% in 2010, just before the beginning of the Syrian conflict. In the meantime,
Lebanon will mobilize $16 billion for its existing financing needs in 2016 for the
rollover and servicing of the debt.
In the meantime, our fiscal deficit grew to more than 8% of GDP, with additional
cumulative expenditure directly related to the Syrian displaced crisis amounting
to $0.54 billion, and lost revenues of around $1 billion in 2015, a total of $2.4
billion since 2011 due of numerous factors related to the Syrian crisis. In fact, for
the first time since the end of Lebanon’s civil war in 1990, our fiscal revenue
decreased in 2015 by 10%, bringing revenue to GDP to 19.3%.
End of slide 7 fiscal impact

5. SLIDE 8
The crisis has negatively affected key growth drivers, such as construction,
tourism and the service sector. Exports have decreased due to the deterioration
of Lebanon’s only land export route which crosses Syria.
The depletion of Lebanon’s environmenton one hand, and of its infrastructure on
the other, including public schools and hospitals, roads, and public utilities, is very
quick and massive.
Although the displaced benefit from various subsidized goods like electricity,
bread, medication, and others, 59% of the Syrian children between 6 and 14 years
old present in Lebanon remain out of school as I already mentioned, and 41
percent of the displaced population lives in substandard shelter conditions, and
around US$20 million of due bills for the hospitalization of displaced Syrians are
uncovered.
For the electricity only, and knowing that Lebanon has borne more than $2 billion
losses yearly between 2011 and 2014, and more than $1.2 billion in 2015, the
number of additional users has officially reached 1.17 million, and the cumulative
cost related to Syrian displaced only has reached $434 million. As the Lebanese
were waiting to finally enjoy 24 hour supply per day, and due to increased
demand, they are still getting 12 to 14 hours a day, if not less. On the other hand,
the incremental degradation of the environment due to the presence of the
displaced population can be translated by an increase of 20% in air emissions,
between 8 and 12% increasein water demand, between 8 and 14% in wastewater
generation and 33% in urban densification. The yearly cost on the environment is
estimated at $3.7 billion.
Water and telecommunications’ services have clearly declined, and some severe
utilities problems are directly related to the massive presence of the displaced.
Generally speaking, Lebanon spends an increased amount of money on
infrastructure needs, including water, electricity, and roads, to cater for
development needs and for servicing the displaced.

6. Another important burden to be considered is security. With 1.2 million displaced
on Lebanese soil according to UNHCR, and more than 1.5 million according to the
Lebanese authorities, small delinquency has risen. On the other hand, and as a
direct consequence of Syria’s conflict, the Lebanese Armed Forces are fighting
extremists from Daech and Jabhat Al Nosra on the northeastern border. While
some of the displaced are believed to represent a threat in the back of the LAF,
Lebanon had to recruit 15 thousand persons in the armed forces during the past
two years, which is a 20% increase in the numbers and an extra direct yearly
burden of $147 million every year. We are also substantially increasing our
ammunition and maintenance military expenditure, in line with the support
received from the USA and other friendly countries, as we need to match this
support and our new recruits with adequate recurrent expenditure.
SLIDE 9
As the displaced may remain displaced for an average of seventeen years
according to previous crises’ statistics, short-term answers only are obviously not
helpful. While humanitarian needs continue to exist and need to be addressed
through humanitarian funding channels, additional financing needs should be
leveraged to strengthen the capacities of Lebanon and its host communities to
absorb the shocks on their economic and social fabric. In addition, concessional
financing facility to complement existing humanitarian and stabilization financing
should be provided to address medium-term development needs in Lebanon in
sectors impacted by the Syrian conflict and the large presence of displaced.
End of slide 9
SLIDE 10
SLIDE 11
Taking into consideration that there are consistently large gaps in humanitarian
and stabilization financing, for example only $1.4 billion were reportedly received

7. of the $2.4 billion funding needed through LCRP 2015 and that morethan 90% of
the funding has been outsideof the budget to the UN or the NGOs, the
appropriateresponsemusthave three dimensions:
SLIDE 12
1- The first response is exclusively grant based of a total of $2.48 billion
according to the Lebanon Crisis Response Plan of 2016 of which 35% is
destined for stabilization and 65% for humanitarian programs toward the
displaced and the host communities. (DISTRIBUTE APPENDIX 1). Let me on
the other hand emphasize that grants remain absolutely critical for aid and
relief, but also for the sustainability of Lebanon and its going concern, given
the huge increased pressure on public finance and debt dynamics due to
the displaced crisis.
SLIDE 13
2- The second is adequate budget support. As already outlined, Lebanon
has very sizeable increased expenditure due to the Syrian displaced crisis
on various budget components such as education, health, social affairs,
military, and subsidies, as well as debt servicing. Therefore the total budget
support needed amounts to $2.01bn required in the form of a yearly
Eurobond interest rate subsidy of $402 million or any other direct budget
support mechanism. (Appendix 2)
Buying down interests on existing loans of $ 4.04 billion due until 2048 and
interest of $776 million (assuming total disbursement of loans) is critical to
allow Lebanon to move forward with them despite its deficit and its level of
indebtedness. (Also Appendix 2)
End of slide 13
SLIDE 14

8. 3- The third is at the level of development needs since the country is facing
heavy development needs, some of them being already in the pipes, from
which displaced would benefit greatly in addition to the Lebanese
population. (DISTRIBUTE APPENDIX 3). This consists of the priority
development investment programs of $4.3 billion that should receive very
concessional financing (Appendix 3).
The total amount needed for budget support and development needs
would then reach $6.3 billion over 5 years, in addition to the humanitarian
needs of $2.48 billion over 2016.
Those needs are big, but they are real and all closely tied to the refugees’
issue. Their prioritization will be finalized in line with donors’ response.
End of slides 14
SLIDE 15
Excellences, Ladies and Gentlemen, those needs are real and accurate. They are
simply enormous for a country like Lebanon, given its size and its existing
problems. The grant component is of utmost importance, in addition to budget
support and concessional financing. The words of Antonio Guttierrez calling for
allowing institutions like the WB to provide budget support grants in times of
crises are still echoing. It is only fair that sizeable budget support offset extra
expenditure created by the load of displaced, including extra debt servicing.
SLIDE 16
Channeling adequate and timely support is critical, and if it fails to match the
needs, we might be faced with an increased risk to economic and social security,
increased tensions between communities and increased risks of breakdown of
serviceprovision systems, increased risks of diseases, malnutrition and morbidity,
youth - diverging their potentials and capacities into undesirable negative coping
mechanisms, more illegal migration of displaced Syrians and the international
community might have to settle the bill with additional interests at some point in
time, later on.

9. Meanwhile, our countries would have been irreversibly hit, the displaced will
have fled to other places, and more instability factors, among which poverty and
insecurity, would have been created.
Thank you very much.
LAST SLIDE