Lebanon launches cash card aid, despite funding shortfall

Lebanon opened registration for two cash assistance programmes to help 700,000 vulnerable families cope with the withdrawal of subsidies.

A ration card cash assistance programme, which comes with an estimated price tag of $556m to provide up to $126 a month for eligible Lebanese families, is not yet fully funded [File: Mohamed Azakir/Reuters]

Beirut, Lebanon – Following months of delays, and with only some of the funding secured, Lebanon on Wednesday opened registration for two cash assistance programmes to help 700,000 vulnerable families cope with the withdrawal of crucial subsidies.

Social Affairs Minister Hector Hajjar said at the launch event at the Grand Serail in downtown Beirut, where Prime Minister Najib Mikati, lawmakers, and diplomats were in attendance, that the cash assistance initiatives are only meant to provide temporary relief.

“These programmes are not the solution,” he said.

Registration for the initiatives will remain open until the end of January.

First announced last September under former Prime Minister Hassan Diab’s caretaker government, the roll-out of the programmes had been hampered by technical and administrative problems, said officials.

But funding shortfalls have also been an issue.

The World Bank has secured a $246m loan to fully fund one programme – called Aman – that aims to give 150,000 families roughly $150 a month each and cover $200 in school costs for 87,000 secondary students. All payments for the Aman programme will be denominated in United States dollars.

But the ration card programme, which comes with an estimated price tag of $556m to provide up to $126 a month for eligible families, has yet to secure a confirmed source of funding. It is also unclear whether the cash will be distributed in US dollars or in Lebanese pounds – a crucial distinction given the pound is subject to sudden, violent depreciations that can easily erode the benefit’s purchasing power.

Hajjar said that talks between the government and World Bank are in “advanced stages” to secure funding for the ration card programme.

World Bank Regional Director of the Mashreq Department Saroj Kumar Jha told Al Jazeera that the Lebanese government has sent a formal request to secure funding, but that no amount has been confirmed yet. He also said that he does not expect the World Bank will fund the entire programme, and that the Lebanese government needs to earmark funds for the programme from its 2022 national budget.

“This is how sustainability comes,” Jha said. “You need to better allocate resources for the need of the people.”

For more than two years, Lebanon has been in throes of a crippling economic crisis that has decimated lives and livelihoods. Over three-quarters of the population now lives in poverty, while the Lebanese pound has lost 90 percent of its value.

With the economy in tatters and no viable productive sector, the government has resorted to taking out loans from multiple lenders simultaneously to try and keep the country functioning at a bare minimum.

The government initially intended to introduce the targeted cash assistance programmes as an immediate replacement for expensive blanket subsidies for petrol, fuel, wheat and medicine that cost the state around $7bn every year.

With foreign reserves dwindling at the Banque du Liban, the central bank, the government and some economic experts have argued that directing what’s left of the country’s financial resources to the poorest households would be far more effective than universal subsidies, especially in the absence of a viable social security programme.

However, due to political squabbling and paralysis, Lebanon started to lift subsidies without the cash assistance programmes in place to cushion the blow for the poorest households.

Over the summer, the government started to roll back fuel and petrol subsidies. It partially withdrew medicine subsidies last month, and continues to gradually hike bread prices.

Hajjar insisted that the government has been working “nonstop” to roll out cash assistance and that the failure to time the withdrawal of subsidies with the implementation of the new benefits was due to administrative and technical problems.

“Despite all our efforts, the worsening economic crisis was faster, especially with the lifting of subsidies of key goods,” he said.

Corruption and distrust

Activists and the international community continue to urge Lebanon to pass and implement anticorruption and transparency laws. But corruption remains endemic.

During Wednesday’s press conference, Hajjar and Central Inspection Bureau Director Georges Attieh tried to alleviate fears that corruption and political nepotism will determine who is eligible for cash assistance.

Families apply through a digital platform and have to go through what the authorities describe as a rigorous vetting process to ensure that they meet requirements. The United Nations’ World Food Programme, World Bank, and eventually an independent third-party company are supposed to follow up and monitor the programme’s implementation.

“Everything is fully digitised without any chance for someone to interference or doctor the data,” Hajjar said. “I will repeat this because people say this is an elections card.”

But elections are slated for late March – the first parliamentary elections in Lebanon since the economic crisis took hold. Activists and economic experts have speculated that the cash card programmes will be used by Lebanon’s ruling parties as a patronage tool to cement political loyalty.

Even more concerning, experts say, is that the programmes are launching in the absence of a wider financial and economic recovery plan – which means recipients may face worse conditions than the aid is designed to deal with. The Lebanese pound continues to fluctuate daily, and inflation is soaring.

The government hopes to reach a preliminary agreement with the International Monetary Fund for a bailout by the end of the year. But the past two years have seen virtually no movement by subsequent governments on producing a credible reform blueprint that is a precondition for unlocking billions of dollars in international aid.

Postdoctoral research fellow in finance at University College Dublin Mohamad Faour told Al Jazeera that without such reforms, the cash assistance programmes will only bring partial relief to struggling families.

“It’s merely an ad hoc measure, if we are to assume that it’s done in good intentions – as difficult as it is,” he said. “Given that it’s implemented in the absence of a broader economic and financial stabilisation plan, there are questions about its viability in the medium to long term.”

Faour says he can’t help but feel “very sceptical” about the timing of the programme’s launch on Wednesday, given elections are right around the corner.

“The way things are moving, the political class wants to move in the direction where we have a society that is heavily dependent on aid,” he said.

Source: Al Jazeera