Institutional Efforts Continue Support for the Lebanese People
The focus on the desperate situation facing the Lebanese sometimes does not give enough attention to efforts to make a positive difference by the international community and Lebanese abroad, among others. Two events this past month are of interest both for addressing immediate needs and for sowing the seeds for longer-term recovery.
The World Bank approved a loan of some $246 million over three years from previously allocated funds to a program supporting some 147,000 extreme poor and vulnerable Lebanese families (786,000 people) as the government faces the necessity of eliminating subsidies for essential goods. Funds will be provided to the government both for distribution in the form of cash cards, thus supporting local businesses, and to enhance the country’s woefully inadequate social safety net.
As a multilateral organization, The World Bank is required to work with the local government and within mutually agreed guidelines for distribution. With extensive experience in cash card transfer programs worldwide, the Bank is able to assist the government to adopt best practices in ensuring that those in need receive the funding. This will counter one of the major drawbacks to existing subsidies in Lebanon which benefit all consumers regardless of need, meaning high-income families receive the same level of benefit as those with less ability to pay for food, medicines, fuel, and lodging.
According to Haneen Sayed, World Bank Lead Operations Officer and Task Team Leader, “To ensure sustainability, the [program] will support the development of a comprehensive social safety net delivery system that can respond to future shocks.” She explained that the goal is to enable the Lebanese government to upgrade the current National Poverty Targeting Program (NPTP) with a digital National Social Registry for prompt and efficient identification of households qualified to receive social assistance based on an assessment of their needs and living conditions. In the immediate aftermath of the port explosion, the LAF was tasked with food distribution to needy families using the NPTP which was helpful but not comprehensive in reaching target households.
An important component of the program includes efforts to keep children from families in extreme poverty from “dropping out of school through top-up cash transfers that cover the costs of general and vocational education,” covering an estimated 87,000 children ages 13-18. Another element will provide funding to the Ministry of Social Affairs and its Social Development Centers to increase access to quality social services for poor and vulnerable households from different population cohorts including refugees.
Looking to help the manufacturing sector to increase employment and exports, the government has teamed with expatriate Lebanese to establish the Cedar Oxygen Fund to support the recovery of the industrial sector of Lebanon and small and medium enterprises that are part of supply chains. By providing financial vehicles for trade financing and equipment procurement, the fund will make up the shortfall that has disabled Lebanon’s private sector. It also aims to boost exports so that employment is protected and expanded.
The fund will provide manufacturers in the country with access to short-term trade and supply chain finance products, such as import, export and receivables finance, which will be available to both exporters and importers. Deals will be originated by a select number of domestic partner banks, together with the Association of Lebanese Industrialists (ALI).
The fund is especially critical given the state of the banking sector in Lebanon which has neither the liquidity nor the capital to support development projects. Companies are unable to secure loans or even access their own deposits under the current informal capital controls. With the currency’s steep declines, an off-shore dollar-based credit facility will make a difference to the medium and large scale entities that qualify for loans.
The fund has been set up in Luxembourg with the central bank of Lebanon providing $175 million as an anchor investor. Its founders hope to reach a fund size of $750 million with investments from development finance institutions and support from the Lebanese expatriate community. In a recent Lebanese Institute of Financial Executives (LIFE) webinar “Coming to the Aid of the Lebanese Industrial Sector,” Dr. Fady Gemayel, President ALI, stressed the multiplier effect of supporting manufacturing in terms of direct employment, supply chains, and local communities, as well as the foreign currency generating role of exports.
Hopefully, these private sector and multilateral and international support efforts will enable Lebanon to achieve some level of stability as political forces continue to dither over the composition of the country’s government.
The views and opinions expressed here are those of the author and do not necessarily reflect the position of the American Task Force on Lebanon.