The World Bank and Lebanon's caretaker finance minister jointly called on Friday for the formation of a new government after half a year of political stalemate, saying a new administration was needed to halt "confusion" over the economy.
Almost seven months since the parliamentary election, Prime Minister-designate Saad al-Hariri has hit a wall in his efforts to form a national unity government as political factions jostle for positions in a new cabinet.
Finance Minister Ali Hassan Khalil and World Bank Vice President for the Middle East and North Africa Ferid Belhaj said in a statement a new government was needed soon, "to put an end to the confusion over the financial and economic situation and to produce a climate of confidence regarding the future of projects scheduled for Lebanon".
Politicians have repeatedly warned there is a risk of economic crisis if a government is not formed soon.
The World Bank has committed $2.2 billion for projects in Lebanon including transport and job creation. But around $800 million is unused while awaiting government approval and Lebanon must pay commitment fees on it.
Members of the outgoing cabinet have remained in office in a caretaker capacity but are unable to take major decisions until a new cabinet is named.
More than $11 billion of international donor funding pledged in April is also contingent on a new government making a tangible commitment to economic reform.
Belhaj and another World Bank official two weeks ago said Lebanon was losing momentum and there was a risk donor might start losing interest.
Lebanon has the world's third highest debt-to-GDP ratio and a new government must be in place before Lebanon embarks on major fiscal reforms. The International Monetary Fund said in June these reforms are urgently needed to put the debt on a sustainable footing.
The World Bank estimates Lebanon's national debt will stand at 155 per cent of gross domestic product by the end of 2018 and that a rise in current spending will increase the fiscal deficit to 8.3 per cent of GDP in 2018, from 6.6 per cent in 2017.
(With inputs from agencies.)