After Lebanon’s long civil war and again after the 2006 war, the country undertook reconstruction. Although the programme following the civil war succeeded in restoring some core infrastructure, it also built-up fiscal liabilities and left the administrative capacity in a fragmented state, while the response after 2006 was split between competing political groups at home and among donors (Dibeh, 2005; Hadad-Zervos, 2005; Hamieh and Mac Ginty, 2010; IMF, International Monetary Fund, 2010).

The country is now having to embark on another round of reconstruction from a much weaker position. The relevant question is therefore not how much financing can be mobilised, but whether each commitment is linked to a verified need, involves a transparent procurement process, is linked to clearly defined executing and operating institutions, and is based on a liability that is in line with the state’s ability to repay.

This article proposes an operational mechanism for establishing that connection: a Reconstruction Finance and Accountability Compact. It begins by examining the extent of current preliminary reconstruction needs and the financial situation, then examines five recurring limitations in Lebanon’s reconstruction history.

The proposed compact addresses these constraints through a unified project registry, an asset-based framework for allocating financing, four milestone-based disbursement gates, a debt-and-banking firewall and a public asset map.

The compact is designed as a common minimum accountability framework rather than a substitute for existing arrangements. Its shared requirements for transparency, project registration, fiscal assessment and accountability would apply to all major reconstruction projects irrespective of financing source and whether they are implemented within or outside the state budget, while each financing institution would continue to apply its own procurement, fiduciary and reporting procedures within that common framework.

Reconstruction needs exceed the current baseline, while fiscal space has narrowed

The World Bank’s March 2025 Rapid Damage and Needs Assessment (RDNA) estimated physical damage at $6.8 billion, economic losses at $7.2 billion, and total recovery and reconstruction needs at approximately $11 billion. An estimated $3-5 billion would require public financing and $6-8 billion in private sources. Housing is the largest component at approximately $6.3 billion, or 57% of the total (World Bank, 2025).

These estimates should be treated as a lower bound because they capture only damage incurred between 8 October 2023 and 20 December 2024. Additional destruction during renewed hostilities after the RDNA cut-off, including the regional military escalation that began on 28 February 2026, massively increased reconstruction requirements beyond the RDNA estimate (United Nations, 2026).

A geospatial assessment published in June 2026 by the United Nations Development Programme (UNDP) and Lebanon’s National Council for Scientific Research (CNRS-L) provides a partial indication of this increase. Comparing satellite imagery from 23 October 2025 and 29 April 2026, the assessment identifies more than $1.38 billion in direct building damage south of the Litani River, including 11,095 buildings classified as completely destroyed. It excluded damage to roads, bridges, electricity systems, water infrastructure and telecommunications networks (UNDP and CNRS-L, 2026).

Both figures rest largely on remote observation and require ground verification before use at the project level. Current reconstruction needs therefore substantially exceed the RDNA’s 2024 baseline.

At the same time, given the absence of required policy reforms, Lebanon’s capacity to assume additional public liabilities has narrowed. In February 2026, the IMF described a medium-term fiscal framework as ‘critically needed’ to support bank restructuring, enable social and capital expenditure, and prevent new state commitments from undermining public-debt sustainability (IMF, 2026b). Since reconstruction financing, bank resolution and sovereign debt restructuring all have an impact on the same balance sheet, they must be assessed within a single fiscal framework.

Five recurring constraints in Lebanon’s reconstruction record

Lebanon’s principal constraint has not been an inability to deliver physical projects. After 1990, substantial investment restored roads, water networks, electricity infrastructure and urban assets, while the Council for Development and Reconstruction (CDR) supplied implementation capacity when line ministries were weak (Hadad-Zervos, 2005; World Bank, 2016).

But the real problem was elsewhere. Five constraints appear in the post-civil war period, in the response following 2006, and in the Reform, Recovery and Reconstruction Framework (3RF) established after the 2020 Beirut port explosion. It is these constraints that lead to the various elements of the compact suggested below.

Absence of fiscal anchoring

Reconstruction was financed without a binding fiscal constraint. Rebuilding proceeded alongside persistent deficits and a policy framework that favoured rent-seeking activity over productive transformation (Dibeh, 2005). By 2019, public debt stood at approximately 148% of GDP, and transfers to Électricité du Liban were about 4.2% of GDP, while reforms in electricity, taxation and telecommunications had made limited progress despite the commitments made under Paris III (IMF, 2010).

The IMF’s governance diagnostic corroborates this pattern in more granular form: the 1963 Public Accounting Law does not cover all public entities, so a substantial share of government resources is still decided and executed outside the budget process; budget commitments are approved against available allocations rather than actual cash availability, a disconnect that has repeatedly produced expenditure arrears; and the Treasury Single Account first initiated in 2004 remains incomplete, leaving the Ministry of Finance without a real-time consolidated view of government cash (IMF, 2026a).

Weak institutional continuity

Delivery capacity was concentrated outside the permanent administration and never transferred into it. A World Bank review found that CDR’s work transferred little capacity to line ministries and at times created competing administrative structures (Hadad-Zervos, 2005).

The same discontinuity appears at project level: the Urban Transport Development Project produced substantial outputs and CDR’s performance was rated satisfactory, yet implementation ran for 13 years and unreliable counterpart financing prevented full use of available funds (World Bank, 2016). What was missing was a reliable link between preparation, budgetary commitment, institutional responsibility and operation.

Fragmented financing channels

Reconstruction has been delivered through parallel channels and never consolidated into a single record. Hamieh and Mac Ginty (2010) describe a fragmented and politically competitive post-2006 response, in which Western donors emphasised governance programming while Arab and Gulf donors favoured large-scale, highly visible physical reconstruction.

The pattern recurred after 2020: the 3RF’s Lebanon Financing Facility remained empty for several months, and costed priorities were presented as ready, even though they remained conditional on reforms not yet undertaken (GFDRR and World Bank, 2024). One recent analysis situates these delays within the broader institutional incoherence of the 3RF, which impeded project implementation and institution-building (Harb et al, 2024).

Incomplete procurement information

Lebanon entered the 2021 procurement reform with major information gaps. The MAPS assessment found that 57% of the 210 assessed criteria were not met, a further 34% were only partially met, and procurement data were not systematically collected or published (World Bank, AFD and Government of Lebanon 2021).

Law No. 244/2021 subsequently established the current statutory framework for public procurement (Institut des Finances Basil Fuleihan, 2024). As a condition for receiving reconstruction financing, the recommended compact requires that the framework be applied systematically throughout the contracting process.

Ungoverned public assets

Reconstruction has been treated as a financing problem rather than a balance sheet problem. The assets on which recovery depends, including Électricité du Liban, the ports and Beirut airport, the water establishments, state land and municipal real estate, are held across ministries, municipalities and public enterprises, and have never been assessed as a single portfolio.

Recent analysis identifies this fragmentation across donors, ministries, municipalities and state-owned enterprises as the characteristic reconstruction risk in conflict-affected economies, and observes that fiscal stress converts public assets into an emergency source of liquidity, in which land, enterprises and infrastructure are sold, pledged or monetised on terms that destroy public wealth at the moment that wealth is most needed to support recovery (Saidi and Detter, 2026). Lebanon’s combination of acute fiscal distress and large reconstruction requirements makes that risk immediate.

These constraints show that Lebanon’s reconstruction problem is not a lack of implementation capacity, but a failure to link project delivery to fiscal discipline, institutional responsibility, accountability, transparent financing and procurement oversight. The compact proposed below turns these links into enforceable conditions that should apply to the selection, financing, implementation and operation of reconstruction projects.

The proposed Reconstruction Finance and Accountability Compact

The Lebanon Emergency Assistance Project (LEAP) provides an institutional anchor. Approved by the World Bank’s board in June 2025, designed in response to the October 2023-December 2024 conflict and informed by the RDNA, it is a scalable $1 billion framework to be implemented by CDR under the leadership of the Ministry of Public Works and Transport.

Only $250 million has been financed; the remaining $750 million is a declared financing gap, and the entire $455 million reconstruction works component is unfunded (World Bank, 2026).

LEAP is governed by the World Bank’s procurement and fiduciary regulations, which the compact would not displace. Its financial management, procurement and disclosure arrangements already meet the compact’s minimum requirements, so LEAP offers a working template whose registration, disclosure and verification standards can be extended across the broader reconstruction programme rather than rebuilt in a separate structure.

A unified registry, addressing the absence of a single financing account

International guidance supports project-level tracking across public, private, donor-managed and off-budget financing channels, together with disclosure throughout the procurement cycle (GFDRR et al, 2020; OECD, 2025).

Building on these principles, the proposed compact would assign each major project a unique identifier that links verified need, ownership, responsible institutions, financing terms, procurement information, beneficial owners, contracts, payments, audit findings and service outcomes.

The registry would include donor-managed and off-budget projects, preserve the RDNA as an auditable baseline, and record subsequent damage and financing through a published change log. Registration is a disclosure obligation and would not transfer financial management or procurement authority from the financing institution. The registry records how reconstruction is financed; the asset map described below records what the state owns and operates. The two are complementary rather than alternatives.

These requirements also implement specific recommendations of the IMF’s governance diagnostic: that extra-budgetary spending be reported for the preceding three years, that CDR separately report the foreign-financed capital expenditure it implements, and that budget coverage be extended progressively to bodies such as the National Social Security Fund, the Independent Municipal Fund, Électricité du Liban and the state telecommunications operator (IMF, 2026a). Reconstruction financing implemented off-budget through CDR is precisely the flow that these recommendations target.

Asset-based allocation, addressing fiscal anchoring at the point of commitment

The instrument would follow the characteristics of the asset rather than the preferences of the sponsor offering the funds. Grants would cover vulnerable households, debris removal, non-revenue public goods and project preparation.

Concessional sovereign finance would be reserved for high-return public infrastructure with a credible operator and only within a medium-term fiscal framework. Blended finance and guarantees would apply only where public intervention corrects a defined market failure and exposure is valued and capped. Private and diaspora capital would finance commercially viable assets without blanket state guarantees.

Four disbursement gates, addressing institutional continuity and procurement information

Gate 1 would confirm need, ownership, safeguards and the absence of duplicate financing, confirmed by on-site surveys rather than remote data alone.

Gate 2 would require an approved design and named operator, competitive procurement or a published exception and publication of the contract in accordance with Law No. 244/2021. These statutory requirements would be supplemented by a compact-specific requirement to disclose the ultimate beneficial owners of bidders and contractors (Institut des Finances Basil Fuleihan, 2024; OECD, 2025).

Where a project is financed by an institution applying its own procurement framework, as the World Bank does under LEAP, compliance with that framework would satisfy the gate, provided the resulting contract information is published to the same standard.

Gate 3 would link payments to independently verified outputs. This verification step responds to the IMF’s finding that the near-systemic absence of state accounts audited by the Court of Accounts and submitted to parliamentary oversight breaches a constitutional requirement (IMF, 2026a).

Gate 4 would require the asset to meet agreed service standards with a funded maintenance plan and a confirmed operating institution, making the transfer of responsibility that earlier programmes deferred a condition of final payment.

A debt-and-banking firewall, addressing fiscal anchoring at the point of liability

The IMF has emphasised that Lebanon’s bank restructuring, sovereign debt strategy and new state commitments must be consistent with a medium-term fiscal framework and the restoration of public debt sustainability (IMF, 2026b).

Applying this principle, the compact would require sovereign loans and guarantees to be assessed against the medium-term fiscal framework and a published debt sustainability assessment. It would also prohibit the use of central bank reserves or trapped deposits for reconstruction and require separate accounts and loss allocation rules for reconstruction, bank recapitalisation and depositor recovery. These restrictions constitute proposed safeguards under the compact.

A public asset map, addressing ungoverned public assets

Saidi and Detter (2026) distinguish an asset register, which records what individual agencies already know that they own and serves control, maintenance and compliance, from an asset map, which establishes how public commercial assets function together as a portfolio and what that portfolio could become.

The compact would require such a map before reconstruction capital is committed and before any public asset is sold, pledged or transferred into a new vehicle. It would cover operational commercial assets, including transport systems, utilities, ports, airports, public financial institutions and state-owned enterprises, together with the surrounding urban real estate that is ordinarily recorded as an operational by-product rather than as a source of development value, revenue and housing capacity.

The map would then support a portfolio business plan and professional governance arrangements, in that order, before any restructuring, concession, listing or divestiture proceeds. Where public assets are visible and professionally governed, viable entities can raise finance against their own balance sheets rather than against sovereign guarantees or state banks, which reduces the contingent liabilities that the firewall is designed to contain, and allows private and international capital to be brought in from a position of knowledge rather than distress (Saidi and Detter, 2026).

Implementation should begin by applying the compact to LEAP as a pilot rather than establishing a new institution. As an initial step, the government, the Ministry of Finance, the Ministry of Public Works and Transport, CDR and the Public Procurement Authority should publish the project registry and costed pipeline, classify each project by financing instrument, commission the public asset map and adopt the proposed debt and guarantee rules. Additional financing should be scaled only after the first contracts, payments and service restoration results have been independently verified.

Conclusion

Lebanon’s central challenge is not the absence of plans, but the lack of an enforceable connection between verified needs, appropriate instruments, transparent procurement, measurable results, accountability and fiscal constraints. The proposed compact would establish that connection by making financing conditional on public registration, appraisal, competitive procurement, independent verification, institutional responsibility and affordability.

 LEAP provides an existing platform on which to apply these rules. Its $750 million financing gap, together with the considerably larger national requirement, should be filled only through financing consistent with them. If assets were rebuilt without simultaneously improving fiscal capacity, earlier macroeconomic vulnerabilities would be recreated (Dibeh, 2005); if this were done without stronger institutions, the weaknesses in post-war state-building noted by Leenders (2012) would persist and be amplified.

Further reading 

Dibeh, Ghassan (2005) ‘The Political Economy of Postwar Reconstruction in Lebanon’, UNU WIDER Research Paper No. 2005/44.

GFDRR, Global Facility for Disaster Reduction and Recovery, European Union, United Nations Development Programme and World Bank (2020) Disaster Recovery Framework Guide, revised edition.

GFDRR, Global Facility for Disaster Reduction and Recovery, and World Bank (2024) Lessons from Disaster Governance: Port of Beirut Explosion Reform, Recovery and Reconstruction Framework.

Hadad-Zervos, Faris (2005) The World Bank in Iraq: Iraqi Ownership for Sustainability. World Bank Working Paper No. 39023; primarily an Iraq study; Lebanon’s CDR is discussed comparatively at pp. 14-15 (sections on the pros and cons of project implementation units).

Hamieh, Christine Sylva, and Roger Mac Ginty (2010) ‘A Very Political Reconstruction: Governance and Reconstruction in Lebanon after the 2006 War’, Disasters 34(S1): S103-23.

Harb, Mona, Sophie Bloemeke, Sami Atallah and Sami Zoughaib (2024) ‘The Promises and Pitfalls of Disaster Aid Platforms: A Case Study of Lebanon’s 3RF’, Disaster Prevention and Management 33(3): 286-301.

Institut des Finances Basil Fuleihan (2024) Public Procurement Law No. 244/2021: Unofficial English Translation, Beirut: Government of Lebanon.

IMF, International Monetary Fund (2010) Lebanon: 2010 Article IV Consultation – Staff Report, IMF Country Report No. 10/306.

IMF, International Monetary Fund (2026a) Diagnostic Report: Governance and Corruption – Lebanon, IMF Technical Assistance Report No. 2026/047 (Legal Department, Fiscal Affairs Department and Monetary and Capital Markets Department).

IMF, International Monetary Fund (2026b) ‘IMF Staff Concludes Visit to Lebanon’, press release No. 26/50, 13 February.

Leenders, Reinoud (2012) Spoils of Truce: Corruption and State-Building in Postwar Lebanon, Cornell University Press.

OECD, Organisation for Economic Co-operation and Development (2025) Implementing the OECD Recommendation on Public Procurement in OECD and Partner Countries.

Saidi, Nasser, and Dag Detter (2026) ‘Rebuilding the Middle East Requires Not Just Investment but Also Financial Architecture’, The National, 22 June.

UNDP, United Nations Development Programme, and CNRS-L, National Council for Scientific Research (2026) ‘Building Damage Assessment Estimates Over USD 1.38 Billion Across South Lebanon – until April 2026’, press release, 19 June.

United Nations (2026) Report of the Secretary-General on the Implementation of Security Council Resolution 1701 (2006), UN Doc. S/2026/160.

World Bank (2016) Lebanese Republic – Urban Transport Development Project: Implementation Completion and Results Report, Report No. ICR00003868.

World Bank (2025) Lebanon Rapid Damage and Needs Assessment (RDNA): March 2025.

World Bank, Agence Française de Développement (AFD) and Government of Lebanon (2021) Methodology for Assessing Procurement Systems (MAPS): Lebanon Assessment Report, headline results at p. x; data and control findings at pp. xii-xviii.

World Bank (2026) ‘Lebanon Emergency Assistance Project: Frequently Asked Questions’, 17 February.