The World Bank said on Wednesday it had approved a grant of $70 million to support the Lebanese government's reconstruction efforts following the 34-day war between Israel and Hezbollah guerrillas.

"The impact of the hostilities on the Lebanese economy has been severe and deserves the attention and support of the international community," World Bank Managing Director Juan Jose Daboub said in a statement.

"Since the cessation of hostilities, the Bank has been looking at ways in which it can support the government of Lebanon without adding to its public debt burden."

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Even before the war, Lebanon was struggling to rein in a public debt of around $38 billion, whose servicing weighs heavily on public finances.

Though the World Bank grant is dwarfed by some $900 million in aid Lebanon secured at an international conference in Stockholm earlier this month, it is rare for the international body to channel surplus funds to middle income countries. It usually gives out loans; after the tsunami in 2004, Indonesia received just $25 million in grants from the World Bank.

The World Bank money will go into a trust fund that will be used to scale up existing projects and advance projects already being prepared, especially in the water and municipal sectors, it said.

Part of the grant will also go to the private sector arm of the World Bank, the International Finance Corporation (IFC), which is preparing a programme to rehabilitate Lebanon's private sector, it added.

The World Bank has already begun, at the request of the government, to prepare an assessment of the economic and social impact of the war. The document will be used to prepare for an international debt aid conference that Lebanon hopes to host before the end of the year.

Lebanon had planned that conference long before the war, hoping for help in restructuring its debt.

Apart from the Stockholm donations Lebanon received hundreds of millions in aid from oil-rich Arab countries.

The World Bank's Post-Conflict Fund has also allocated a e1 million grant to help the Lebanese government establish a transparent and accountable system for tracing reconstruction assistance.