World Bank says Syria eligible for new loans as arrears cleared

By Andrea Shalal

WASHINGTON, May 16 (Reuters) - The World Bank said on Friday it had cleared Syria's $15.5 million in outstanding debt after receiving payments from Saudi Arabia and Qatar, making the country eligible for millions of dollars in grants for reconstruction and budget support.

Saudi Arabia and Qatar said in April that they would cover Syria's arrears with the multilateral development bank, which will make it eligible for new grant programs, subject to the bank's operational policies.

The step follows a surprise announcement by U.S. President Donald Trump that he would order the lifting of all sanctions on Syria, which is struggling to rebuild after 13 years of civil war. The United States is likely to begin providing some sanctions relief in the coming weeks.

As of May 12, Syria has no outstanding balances with the International Development Association, the bank's fund for the poorest countries, the World Bank said.

"We are pleased that the clearance of Syria’s arrears will allow the World Bank Group to reengage with the country and address the development needs of the Syrian people," the bank said in a statement. "After years of conflict, Syria is on a path to recovery and development."

The bank said it would work with other countries to help mobilize public and private financing for programs that can help the Syrian people build better lives, stabilizing the country and the region.

It said its first project with Syria would focus on access to electricity, which would enable economic progress and aid the delivery of essential services, from health and education to water and livelihoods. No further details were provided.

The bank said the proposed project was the first step in a planned increase in World Bank Group support to confront Syria’s urgent needs and invest in long-term development.

FINANCIAL INFRASTRUCTURE

Secretary of State Marco Rubio on Thursday said the U.S. intends to issue waivers under the "Caesar Syria Civilian Protection Act", which Washington used to impose sanctions on former President Bashar al-Assad's government, as well as secondary sanctions on associated companies or governments.

The lifting of sanctions, some imposed on Assad's government and some in place for decades, along with the settling of Syria's World Bank arrears will lay the groundwork for its reintegration into the global financial system.

The International Monetary Fund, World Bank and Saudi Arabia hosted a high-level meeting with Syrian officials in Washington in April. Afterwards, they issued a joint statement recognizing the urgent challenges facing the Syrian economy and expressing their commitment to support the country's recovery efforts.

The IMF has also appointed its first mission chief to Syria in 14 years - Ron van Rooden, a seasoned IMF official who had previously headed IMF efforts in Ukraine.

The IMF last released an in-depth surveillance report on the Syrian economy in 2009.

Martin Muehleisen, a senior fellow at the Atlantic Council and former strategy chief of the IMF, said the global lender's first urgent task would be to provide technical assistance to Syrian authorities to help them rebuild the country's financial infrastructure, policymaking bodies and collect needed data.

Muehleisen said those efforts could be funded by donors and grants in-kind, and could be launched in a matter of months, while the World Bank could help on a broader regional level to ensure good governance and functioning ministries.

Jonathan Schanzer, a former senior Treasury official who now heads the Foundation for Defense of Democracies, said Syrian officials had told him the needs were great, but he urged the U.S. should phase in sanctions relief carefully nonetheless.

"They couldn't even get licenses for Microsoft Office. They just didn't have the ability to actually implement software on their laptops," he said.

One Republican source said rebuilding Syria's technology access would be essential to getting it back on the SWIFT bank processing system, but the process could take months, if not years.