The European Bank for Reconstruction and Development (EBRD) signed a $100 million financing deal with Lebanon’s Bank Audi on Thursday, in its second environmental technology investment in the country since starting work there a year ago.
The EBRD, a multilateral development bank, will give Lebanon’s largest lender Audi a $90 million loan, complemented by $10 million in concessional funding from Taiwan’s foreign aid programme TaiwanICDF.
The money is being invested through the EBRD’s Green Economy Financing Facility (GEFF) programme, which has provided almost 4 billion euros in financing for green projects in 25 countries since 2006, the EBRD said.
Audi will lend money on to private sector sustainable development projects at “competitive” rates, it said. Eligible parts of some projects will benefit from even lower interest rates subsidized by Lebanon’s central bank under an existing national program.
Audi Chairman Samir Hanna said Audi would match the GEFF’s $100 million, bringing the total green financing package to $200 million.
Lending and economic activity has slowed in Lebanon as its economic and political troubles deepened this year.
Six months since a parliamentary election, Lebanon’s politicians are yet to agree on a unity government that will need to get to work on badly needed economic reforms. Politicians have warned of an economic crisis unless a government is formed soon.
Lebanon has the world’s third-largest public debt-to-GDP ratio, stagnant growth and what the International Monetary Fund (IMF) has said are increasing vulnerabilities in its financial system.
Energy supply is a particular problem: Lebanon has suffered chronic daily power shortages of between three and 18 hours since the end of the civil war in 1990.
“Lebanon’s energy challenges are significant,” EBRD Lebanon Head Gretchen Biery said. “GEFF Lebanon is one of many complementary sources of financing that are urgently needed to improve power supply, diversify energy sources and promote environmental awareness.”
A top priority for a new government should be reforming the electricity sector, the World Bank says, describing subsidies to the state power provider as a “staggering burden” on national finances.
This is the second investment the EBRD has made in Bank Audi, after taking a 2.51 percent equity stake in March.
In April, the EBRD made its first green investment in Lebanon, subscribing to a green bond issued by Fransabank for $15 million.
