Lebanon “loses” €494 million in loans

Nida Al Watan

The Jounieh A1 highway expansion project, which had been relied upon to ease severe traffic congestion on the highway, along with 5 vital projects such as wastewater systems in the Keserwan area, were all opportunities Lebanon missed due to the loss of loans and grants allocated to them, amounting to approximately €494 million from international donors.

On 30 January 2026 (before the outbreak of the Iran-support war), the Council of Ministers decided to approve the request of the Council for Development and Reconstruction (CDR) to cancel, not postpone, these projects. Why? Who were the financing entities behind these loans? And can the allocated funds be used for other purposes?

Before the expansion of the war in March, it had been expected that the Jounieh A highway expansion and the wastewater project in the Keserwan area, among other vital projects entrusted to the CDR, would move forward. However, at the end of January, the Council of Ministers approved the CDR’s request to cancel them. This raised questions about the reason for cancellation at a time when even the smallest investment is needed for Lebanon’s deteriorating infrastructure.

The CDR’s request and the government’s decision to cancel (not postpone) 6 vital projects did not come arbitrarily or for unclear purposes. According to an informed source cited by Nidaa Al Watan, the CDR’s request followed a decision by the European Investment Bank (EIB) and the French Development Agency (AFD) to halt the promised financing for several projects. The Council of Ministers, while approving this request, also tasked the CDR with seeking new financing from Arab and international institutions for the projects whose loans were canceled.

Why? It is said that negotiations with the EIB and international partners to reconsider the cancellation of the loan agreements are still ongoing. However, given the current war conditions, it is unlikely that these institutions will reverse their decision.

Thus, the CDR’s request to cancel the loans for six vital projects, and the Council of Ministers’ approval, stem from “international donors withdrawing from granting loans to Lebanon.” Consequently, the government instructed the CDR to pursue alternative financing from Arab and international institutions to ensure funding for these important projects.

Regarding whether the funds allocated under the loan agreements could be redirected to other uses, the same CDR source stated:

Each loan agreement signed between Lebanon and a financing institution such as the EIB or AFD specifies the project it will fund. Therefore, it is not permissible to use the loan value to finance projects other than the one specified in the agreement.

Loan agreements also stipulate the conditions under which they may be canceled, resulting in full or partial termination of funding; especially if disbursement had already begun prior to cancellation. Most agreements also require the Lebanese state to provide the funds necessary for land expropriations needed for project implementation.

However, canceling the loans does not mean canceling the projects themselves or making their implementation impossible. This is evidenced by the Council of Ministers’ decision, which included instructing the CDR to secure new funding for the same projects whose loans were canceled.

Reasons for loan cancellations

The reasons behind the Council of Ministers’ decision, following the proposal by the AFD and EIB on 22 January 2025, to annul the loan agreements, are several, with two main factors:

1)      The Lebanese state’s default between 2022 and 2024 on repaying installments and interest on external loans signed with most financing institutions.

2)      Failure to secure the funds required for land expropriations for some loan-financed projects, due to the financial and monetary crisis since late 2019.

Since most financing agreements stipulate that if Lebanon defaults on one agreement, the financing institution has the right to consider all agreements, not just the one in default, as canceled, both institutions proceeded to cancel Lebanon’s loans.

Canceled projects

The 6 projects canceled by the Council of Ministers, based on the CDR’s request, are as follows:

Wastewater project in the Qadisha Valley: Loan No. CLB 105401F worth €34 million from AFD. The agreement was signed on 16 May 2018; the law was issued in 2019 and the decree in 2021. The project was canceled due to lack of funds for expropriation compensation, inability of local authorities to provide required sites for pumping and treatment stations, and procedural delays amid recurring crises.

Wastewater project in the Keserwan area: Loan No. FI N.24.916 worth €70 million from the EIB. Agreement signed in 2009; law issued in 2011.

Lebanese highways project (Phase II – Jounieh A1 expansion): Loan No. FI N.82.161 worth €75 million from the EIB. Agreement signed in December 2012; law issued in 2015 and implementing decree in November 2015.

Wastewater project in the Ghadir basin: Loan No. FI N.84.185 worth €68.5 million from the EIB. Agreement signed in 2018; law issued in October 2018 and ratification decree one month later.

Roads and Employment Project: Loan No. FI N.89.857 worth €151.1 million from the EIB. Agreement signed in September 2019; law issued in December 2023.

Wastewater networks in the Greater Tripoli basin: Loan No. FI N.89.004 worth €96 million from the EIB. Of this, €74 million was covered by an agreement signed in October 2019 but never submitted to Parliament. Another €18 million from the same bank was issued as an in-kind grant decree in October 2020, and a €4 million grant agreement was decreed in December 2020.

The reasons for canceling the last 5 projects include the long lapse since signing without any disbursement, Lebanon’s prior default, and the EIB’s assessment that new agreements could be prepared once the required financial, economic, and monetary conditions are met.

In sum, due to years of inaction by the Lebanese state in fulfilling its obligations, lack of available funding, the ongoing financial crisis since 2019, and failure to implement required reforms in a timely manner, financing for these vital and necessary projects was lost.

As a result, once the 2026 war ends, the CDR will have no choice but to seek alternative funding sources, particularly from Arab funds, to implement these essential projects, as mandated by the Council of Ministers’ decision issued at the end of January 2026. However, this effort will only begin once the war subsides and stability returns, as no financing entity is willing to fund major infrastructure projects in Lebanon amid ongoing conflict and destruction.