Lebanon-Arab Reconstruction Aid

The Arab aid approved at the 1979 Tunis summit meeting was the key to Lebanon's reconstruction program. During the five-year period from 1980 through 1984, the seven Arab members of the Organization of Petroleun Exporting Countries were to provide specific sums annually. The program got under way late, so that in 1980 just US$168.2 million of an intended US$400 million was actually disbursed. The pace quickened in 1981, however, with the arrival of US$202.9 million. The cease-fire in southern Lebanon from July 1981 until the Israeli invasion the following June provided an opportunity to step up disbursements, but, in fact, they declined. During the first half of 1982, only the United Arab Emirates made any effort to meet its commitment, paying some US$13 million, presumably its regular first-quarter payment.

The Arab states reacted to the Israeli invasion by virtually discontinuing aid. By November 1982, almost three years into the program, the Ministry of Finance had reported receiving just US$384.2 million of an expected US$1.2 billion. Some aid did trickle in during late 1982 or in 1983, but the highest figure reported for total aid deliveries agreed to in Tunis in 1979 was around US$420 million.

By far the most reliable of the donors was the UAE. It had pledged US$45.7 million a year and met its 1980 and 1981 commitments in full, in addition to the US$13 million first-quarter contribution in 1982. At the opposite extreme was Libya, which had pledged US$62.84 million a year but had provided nothing by the end of 1982 (except covert arms deliveries to pro-Libyan militia groups). Algeria, which had pledged US$142.8 million a year, later declared that it could not comply because of financial difficulties. The remaining donors agreed to meet Algeria's commitments, but there is no evidence that they ever provided the funds.

Saudi Arabia, with the largest annual commitment--US$114.3 million-- began its disbursements late. In 1980 it provided onethird of the amount due and in 1981 two-thirds. The Saudis made no further payments before the 1982 invasion. Iraq met its 1980 annual commitment of US$59.4 million but made no further contributions because of its war with Iran. Kuwait furnished US$25 million in 1980 and then in 1981 provided US$67.8 million--US$5 million more than what was due. But it, too, failed to pay anything in the first half of 1982. Qatar provided no assistance in 1980 and in 1981 provided only half of its pledged US$26.8 million.

After the Israeli invasion, the Arab donors provided about US$40 million. They indicated that they would contribute more funds to the reconstruction effort as funds from the World Bank and the industrialized countries became available. In July 1983, a US$229 million aid package was put together by representatives of major donor countries and organizations. Attending the meeting in Paris were officials from Austria, Belgium, Canada, France, West Germany, Italy, the Netherlands, Japan, Britain, the United States, and Sweden. Participating donor agencies included the World Bank, the IMF, the Saudi Development Fund, the UNDP, and the EC and its principal financial arm, the European Investment Bank.

Specific aid agreements were subsequently reached with most, if not all, of the participants at the Paris meeting, which marked the high point in Lebanon's search for orthodox sources of reconstruction finance. But Arab aid was given neither on the scale envisaged at the Tunis summit nor on the more limited scale supplied in 1980 and 1981. Falling oil prices in 1983 caused producers to cut back production to maintain prices. The cutbacks resulted in lost revenue, not only for themselves but indirectly for Lebanon. Some Saudi money did arrive in Lebanon, but only on an ad hoc basis. Some of it, reputedly from King Fahd, was given to charities and for education. Organized financial assistance, however, dried up by the mid-1980s. In early 1985, President Jumayyil appealed to the Saudis for US$500 million in economic aid, but the response did not match the request. The Arab nations, in essence, had lost interest in Lebanon.

Still, the Tunis aid pledge led Lebanon to believe that it could mobilize reconstruction funds if it could come up with practical projects. The CDR viewed the aid pledged as encouragement to intervene in the economy. The CDR's interventionist attitude ran counter to the Lebanese government's long-standing commitment to free-market principles. As a result, the CDR was criticized in government and financial circles for pursuing too interventionist a policy. Thus, in the months before the Israeli invasion, the old politics that had so bedeviled Lebanon were threatening to destroy the new economics on which those who opposed Lebanon's confessional (see Glossary) structure were placing considerable hope.

After the 1982 Israeli invasion, however, the argument became academic. Damage to Beirut and the devastation of communities in the south ushered in a new acceptance of greater state involvement in the reconstruction of the country.

Data as of December 1987