This blog is part of a Better Assistance in Crises Research programme series exploring the implications of Lebanon’s ongoing fiscal crisis for social protection.
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The latest World Bank Lebanon Economic Monitor placed Lebanon’s fiscal collapse within the top ten most severe crises since the 1850s. This is no exaggeration. More than 50 per cent of the population has fallen below the poverty line, unemployment is at 40 per cent, medical supplies have dwindled, and fuel is running out. The Lebanese pound has lost somewhere between 80 to 90 per cent of its value, showing little sign of recovery. This means that even those employed are suffering from plummeting purchasing power, given that the majority are paid in Lira. Such staggering contractions are more often associated with civil wars.
As argued in Part 1 to this blog, Lebanon’s predicaments are not the result of an isolated catastrophe – be that COVID-19 or even the August 2020 port explosion. Instead, their root cause is a flawed politico-economic model which has produced a “deliberate depression” due to policy inaction, elite-led wealth capture, and a political consensus around defending an arrangement that benefit the few.
Within this context, an increasing number of people are facing difficulty securing their basic needs. For help, they must turn to a complicated set of social protection programmes provided by the government (social security and subsidies), UN agencies, international actors, and even local political parties. The financial crisis has had three major impacts on these systems:
- The Lebanese state’s welfare provision (subsidies and social security) is failing to meet the challenge.
- Humanitarian aid, where it is distributed in Lebanese pounds, has significantly diminished purchasing power.
- Precarity is locking the population into a deeper dependent relationship with the kleptocratic elite, risking further fragmentation and the institutionalisation of a parallel economy.
This is not sustainable. Lebanon must, end its fragmented approach to welfare and embrace comprehensive social protection initiatives based on universal secular rights-based entitlements. Yet in the absence of a functioning government and limited political will, detailed proposals from the ILO and UNICEF to establish rights-based welfare entitlements sit gathering dust.
Social protection and the Lebanese State
Lebanon maintains a comprehensive subsidy system that mitigated the impact of structural unemployment. It is likely, however, that there will be further removals of price subsidies on primary imports – such as wheat, fuel, and medicines.
The central bank has only USD16 billion left in its reserves, and it costs the country USD6 billion per year to maintain subsidies at their current levels. Removing these subsidies without a safety net will plunge even more of the population into extreme poverty, setting the scene for political insecurity and a new humanitarian crisis.
In addition to subsidies, the other major social protection initiative in Lebanon is the contributory National Social Security Fund (NSSF). The scheme provides health and maternity coverage, an end-of-service indemnity, and a family allowance. Like much of Lebanon’s infrastructure, the NSSF was established in the 1960s by President Fouad Chehab during the country’s brief state-led development period. Lebanon’s political and economic strategies in the post-Civil War period have relied instead on a consumption-orientated rentier model that has eroded the remnants of that era.
However, this scheme is only available to formally employed Lebanese citizens – that is, around 30 per cent of the total workforce, excluding non-nationals and all informally employed (informality constitutes about half of the population).
Today, the NSSF is a sluggish paper-based bureaucracy. This slowness has seen individuals lose large amounts of money where they paid for procedures in USD, but finally received their repayments in devalued Lebanese Lira. Such a situation is also contributing to the collapse of the country’s healthcare system. Private hospitals (82 per cent of the country’s capacity) and medical labs are refusing to accept patients with national insurance, medicine for chronic conditions is also running out, and essential machinery breaking down without repair.
The NSSF does not cover social provision for refugees or migrants, even where they are formally employed and thus contribute towards the fund. 1.5 million Syrian refugees and 200,000 Palestinians are instead classified as temporary and totally excluded.
Multiple exchange rates and humanitarian assistance
Those who fall outside NSSF rely instead on social and humanitarian assistance provided by a patchwork of NGOs, charities, and international organisations. These providers range from flagship cash transfer programmes, like the National Poverty Targeting Programme (NPTP) at the Ministry of Social Affairs, and smaller church groups, civil society organisations, and political activists.
Due to the lack of an official flexible exchange rate, international aid money is losing value against the dollar. The International Rescue Committee refugee winter cash assistance programme, for example, was worth USD575 in 2014 but was only worth about USD180 at the time of operation.
The Lebanese government gave a verbal agreement to permit the distribution of aid in USD. But it remains unclear whether the government plans to act on this. In cases where the government does not wish to see the dollarisation of programmes, they have pledged to allow rates closer to market value. Civil society activists remain concerned that fixed rates will permit further enrichment among the elite. For example, the ESSN programme is beholden to government rates set to 6,240 pounds to the USD. The market, however, now places the pound at 15,475 to the USD. Campaigners believe the elite will keep the remainder of the actual value to finance the patronage components of the subsidy system. Indeed, the Lebanese government subsidise several surprising items – like Viagra and coffee. These industries are supported because they are controlled by a small clientelist clique with deep connections to political decision-makers.
Sectarian social protection
Sectarian political parties are also increasingly providing social protection programmes. In a context of recent mass popular discontent, this trend will likely web citizens back into the flawed system itself.
Indeed, It is important to emphasise that sectarianism is not an inherent and transcendental character of Lebanon, but a form of identity that has changed through time within different contexts. Crucially, one of the mechanisms through which these forms of identity gain saliency is material support.
In April 2021, the Lebanese Shia political party and militia, Hezbollah, began issuing ration cards. Lebanese Forces and the Free Patriotic Movement, two Christian parties, also distributed aid baskets containing “cooking oil, grains, canned food and other food items, medication and fuel vouchers.”
Hezbollah’s ‘Al-Sajjad card’ was launched with the slogan, “we will not starve,” and it grants holders more than 50 per cent of essential goods from affiliated stores. These items are sourced through the parties own supply chains to Iran, Iraq, and Syria. Notably, the card will also be offered to families in areas that the party sees as demographically overlapping between Syria and Lebanon, such as the Al-Qusayr region inside Syria, where Hezbollah waged a bloody offensive against the Syrian opposition in 2013.
Reporting on the initiative, several regional and international journalists incorrectly asserted the card is designed to assist only to “supporters” of Hezbollah. However, the party asserts it is for all those suffering from extreme poverty regardless of political or sectarian affiliation. These initiatives match a pattern of welfare identified by the Political Scientist Melani Cammett, where she argues that sectarian parties that operate on a state level often make an effort to provide interfaith welfare in a bid to shore up legitimacy and guarantee mass support. These initiatives are nonetheless best understood as symptomatic of the system they are ostensibly guarding against.
For many Lebanese the 2019 ‘WhatsApp protests’ provided a glimmer of hope that there could soon be a break from the status quo. Currently, however, there looks to be a lack of progress on moving towards this objective, or even the long-promised ‘technocratic government.’ Party-run initiatives signal a worrying strengthening of the sectarian system. A comprehensive secular based social protection would begin to break the foundations of sectarian identity politics and set the scene for a safe and secure future in Lebanon.
