Subsidizing Electricity in Lebanon

Marie Tyl

“Electricity is the mother of all problems in Lebanon … the size of the problem is beginning to pose a danger to public finances” – M. Chatah, Lebanese former Finance Minister.

Electricite du Liban (EDL), the state’s electric utility, operates seven thermal plants fueled by gasoil, fuel oil, and natural gas. It also runs six hydro-electric power plants. The national utility enjoys a quasi-monopoly over the power sector in Lebanon. However, for reasons ranging from inefficient operation and management to a freeze-of-tariffs government policy, the electricity company has to rely on significant subsidies from the Ministry of Finance to cover its deficit. During 2011, for example, approximately USD 1.57 billion were transferred from the state treasury to EDL, 93% of which was allocated to purchase oil. This subsidy constitutes one fifth of total public expenses, and according to a 2009 social impact analysis by the World Bank “is putting macroeconomic stability at risk”.

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