Lebanon’s battered economy and infrastructure are poised to receive a much-needed lifeline from the international community. In late June 2025, the World Bank approved a $250 million financing package to help repair and rebuild critical public infrastructure in areas affected by recent conflict.
This funding, part of a broader $1 billion recovery framework, aims to kickstart economic recovery and establish a foundation for long-term reconstruction in the country.
The initiative, officially termed the Lebanon Emergency Assistance Project (LEAP), comes as Lebanon grapples with the aftermath of conflict and years of economic collapse, offering a glimmer of hope that essential services can be restored and growth revived.
Lebanon’s economic crisis
Lebanon has been in the throes of one of the world’s worst economic crises since 2019. A combination of financial mismanagement, political paralysis, and external shocks has caused living conditions to plummet.
Lebanon’s economy has suffered a catastrophic collapse. Its GDP shrank by nearly 40%, effectively wiping out years of growth and reducing incomes across the board. The Lebanese pound has lost over 98% of its value, turning what was once 1,500 pounds to a dollar into a rate of tens of thousands, decimating household savings and purchasing power.
This currency freefall triggered triple-digit inflation through 2023, making basic goods unaffordable and pushing a large portion of the population into poverty. At the same time, the banking sector imploded, deposits were frozen, and trust evaporated, forcing the country into a cash-based, dollarized shadow economy. By 2022, around 45.7% of GDP, or $9.8 billion, circulated outside the formal banking system as citizens increasingly relied on hard currency to survive.
This economic freefall was compounded by other disasters. A massive explosion in Beirut’s port in 2020 caused billions in damages, and years of political gridlock left Lebanon without effective reforms or a stable government.
Public services such as electricity, water, healthcare, and education have drastically deteriorated. Even before the latest conflict, Lebanon was described as a nation in “crisis upon crisis,” dealing with financial collapse, a refugee burden, and infrastructure decay.
Yet, by mid-2023, there were fragile signs of stabilisation. In a bid to control hyperinflation, authorities unified exchange rates, and the Lebanese pound’s rampant depreciation slowed. Since July 2023, the pound has stabilised at around 89,500 LBP to $1, which helped tamp monthly inflation down from triple digits to more manageable levels. By 2024, inflation even fell to double-digit percentages, the first time since early 2020 that price growth was below 100%.
The World Bank noted in June 2025 that if political stability and reforms hold, Lebanon’s economy could see modest growth of around 4.7% in 2025, a remarkable turnaround after years of contraction. However, this outlook remains extremely fragile and contingent on sustained reforms and stability.
Just as Lebanon was trying to stabilise its economy, it was hit by a new shock: a spillover of regional conflict. Beginning in October 2023, fighting flared between the militant group Hezbollah (based in Lebanon) and Israel, amid a broader regional war. Clashes and hostilities along Lebanon’s southern border and even strikes in Beirut’s suburbs caused significant destruction.
A Rapid Damage and Needs Assessment by the World Bank found that between October 8, 2023, and December 20, 2024, the conflict inflicted an estimated $7.2 billion in direct damage across Lebanon.
The devastation spanned 10 sectors, from homes and businesses to infrastructure. Critical public infrastructure vital to communities’ well-being and economic activity was hard-hit, with roughly $1.1 billion in damage to key facilities.
World Bank $250M Lebanon recovery plan
In response to these extraordinary needs, the World Bank launched the Lebanon Emergency Assistance Project (LEAP), beginning with a $250 million financing approval in June 2025. This project is structured as part of a scalable $1 billion framework, meaning the World Bank’s initial contribution can absorb and coordinate additional funds (from other international donors or lenders) up to that amount.
The idea is to create a unified, government-led reconstruction programme that others can join, rather than a scattershot of uncoordinated aid projects.
Jean-Christophe Carret, the World Bank’s Middle East director, explained that LEAP’s structure “emphasises transparency, accountability, and results” to serve as a credible vehicle for partners to align their support with Lebanon’s own reform agenda. In other words, the framework is meant to assure donors that funds will be well-managed and impactful, encouraging them to contribute and “maximise collective impact” on Lebanon’s recovery.
According to the World Bank, the project takes a phased approach focusing on fast, high-impact interventions first. Initial actions aim to restore basic services and normalcy for the population as quickly as possible. Some priority components include:
The initial funding will focus on high-impact, phased interventions designed to kickstart Lebanon’s recovery. One key priority is the safe and efficient removal of war debris, with an emphasis on recycling and reuse to reduce waste and supply materials for reconstruction, while also addressing public safety and health concerns.
The project will also rapidly repair essential services such as electricity, water supply, transportation infrastructure, healthcare, education facilities, and municipal services, enabling communities to resume daily life and stimulating local economies. Beyond emergency fixes, LEAP will lay the groundwork for long-term rebuilding by financing technical designs and environmental and social assessments for major infrastructure like roads, bridges, and power stations.
To ensure impact and avoid dilution of resources, interventions will be guided by a data-driven, area-based prioritisation strategy endorsed by Lebanon’s Council of Ministers, focusing on the most severely affected regions and projects that promise the greatest social and economic return.
The initiative’s emphasis on “response, recovery, and reconstruction” in phases means it will tackle immediate needs while laying groundwork for medium- and long-term projects. For example, repairing a vital water pumping station now (recovery) can be paired with plans to completely modernise the water network later (reconstruction).
This sequencing is designed to yield tangible improvements in daily life within months, which is crucial for public morale and economic activity, while not losing sight of the larger rebuilding that may take years.
Rebuilding infrastructure is not just about bricks and mortar; it is fundamentally about reviving the economy and livelihoods. Modern economics has plenty of evidence that post-conflict reconstruction, when done efficiently, can stimulate growth by creating jobs (especially in construction), improving productivity, and restoring investor confidence. In Lebanon’s case, the swift repair of infrastructure and public services is a precondition to economic and social recovery.
Businesses cannot operate during constant power outages, farmers cannot irrigate crops with broken water systems, and children cannot learn if schools remain closed. By focusing on these basics, the World Bank project aims to create the conditions for normal economic activity to resume in affected areas.
The injection of $250 million (with prospects of scaling up) also provides a much-needed fiscal stimulus in an economy starved of investment. Lebanon’s government, essentially bankrupt, has a very limited ability to spend on capital projects.
International aid thus fills a critical gap by funding projects that hire local workers and contractors, purchasing materials (many of which are locally sourced or supplied), and circulating money in the economy.
For example, rubble-clearing initiatives will employ local labour and engineers; repairing schools means contracts for construction firms and suppliers. These activities have multiplier effects that can boost local incomes and consumption.
However, analysts caution that international aid alone cannot solve Lebanon’s crisis. Aid is most effective when paired with sound economic management and reform. The World Bank itself has pointed out that Lebanon’s longer-term recovery hinges on addressing root issues, including a dysfunctional banking sector, unsustainable public finances, and the lack of a reliable social safety net.
The LEAP project is occurring alongside renewed calls for Lebanon to implement a comprehensive reform program (as outlined in a recent Lebanon Economic Monitor report) to restore macro-financial stability and citizens’ trust.
Banking sector sees reform
In July, the momentous economic reform in Lebanon’s history took place, as the country’s Parliament passed a major piece of legislation to finally begin restructuring the country’s broken banking sector, nearly six years after its collapse. This marked the first serious step by lawmakers to tackle the country’s unprecedented financial crisis, which has left millions of depositors locked out of their savings since 2019.
One of the main conditions set by international lenders for financial assistance has been the passage of a bank restructuring law, alongside other key legislation. In April, Lebanon amended its banking secrecy law, ending decades of financial opacity. Washington and the IMF were among those believed to be pushing Beirut to fast-track such reforms to unlock bailout funds.
The Bank Restructuring Law should establish a legal and institutional framework for dealing with insolvent or “zombie” banks, those that have no capital and are unable to operate. The new legislation will replace the existing Banking Control Commission with a new Bank Restructuring Authority, empowered to restructure, recapitalise, merge, or liquidate failing banks. The aim is to stabilise the sector and pave the way for returning funds to small and medium depositors.
In other good news, S&P Global Ratings has raised Lebanon’s long-term local currency credit rating to “CCC” from “CC,” while maintaining a stable outlook and affirming its foreign currency rating at “SD” (selective default). This upgrade indicates an improving ability of the government to service its local currency commercial debt, supported by fiscal surpluses over the past two years and progress on reforms needed to access a new IMF programme.
Still, S&P does not expect major progress on debt restructuring before parliamentary elections in May 2026. The ongoing conflict between Israel and Hezbollah continues to weigh on recovery prospects.
Path to sustainable recovery
In essence, rebuilding physical infrastructure will provide only temporary relief unless accompanied by policy reforms that restructure the banking system, enforce anti-corruption, and create a conducive environment for private sector growth.
International institutions like the IMF are still looking for Lebanon to unify its multiple exchange rates, recapitalise banks, and reduce its deficits, steps necessary to unlock larger-scale financial assistance.
For the Lebanese people, weary of crisis after crisis, this initiative offers a rare bit of good news, namely a plan to rebuild, backed by global support. If managed prudently, this recovery boost could mark the first steps on a path toward economic normalcy and renewed hope in a country that has endured far too much hardship in recent years.