Lebanon launches ration card program, but where′s the cash? | Business | Economy and finance news from a German perspective | DW | 10.12.2021

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Lebanon launches ration card program, but where's the cash?

Lebanon's government is launching a ration card program to support vulnerable families amid an uncontrolled economic crisis. But how is the program financed?

Lebanese Minister of Social Affairs Hector Hajjar recently announced the launch of a long-delayed ration card program and other temporary economic measures to offer some relief to Lebanese citizens trapped in poverty.

The program is intended to help the most vulnerable families. The economic package is worth the equivalent of €492 million ($556 million). Some 700,000 households are to benefit. They are to receive up to $126 (€111) per month for one year.

Eligible families have started applying for what's called the IMPACT program. However, beneficiaries of the program will start receiving payments only from March 2022 but will get the money retroactively for January and February.

Hajjar also announced the start of registration for the Emergency Social Safety Net (ESSN or Aman Project), a scheme worth $246 million (€217 million) and fully funded by the World Bank.

While announcing the initiatives, the minister said the projects were not the solution to all of Lebanon's woes but were designed to offer a temporary lifeline to the citizens while the government hammered out a more profound economic plan.

People pass next of a woman, center, who is sits on the ground with her daughter begging on Beirut's commercial Hamra Street, in Beirut, Lebanon, Tuesday, March 16, 2021.

More than half the population now lives in poverty, while an intractable political crisis heralds further economic collapse

Support without funding

But while the ESSN project has the financial backing, the ration card program seems to lack that.

In an interview for the English edition of the local newspaper L'Orient-Le Jour, the World Bank's regional director, Saroj Kumar Jha, said the Lebanese government had submitted a formal request to the World Bank for funding of the ration card program. Although Jha noted that the World Bank would be ready to consider the request, he said the Lebanese government should fund part of the program from its own budget.

For a cash-strapped country like Lebanon, the search for funds for a temporary program aimed at offering relief to thousands of Lebanese can be challenging. Since Lebanon plunged into an economic and financial crisis in 2019, poverty levels have increased by up to 80%; the local currency has lost 90% of its value and foreign exchange reserves have decreased by $15 billion (€13.26 billion).

Lebanese economist Roy Badaro told DW that there is no money to fund the ration card program. However, he thinks the government could use part of the over $1 billion in Special Drawing Rights (SDRs), an international reserve asset provided by the International Monetary Fund (IMF).

"The government could also use bank deposits or ask for humanitarian support from France, the Europe Union (EU) or the World Bank. However, I guess the ration card program will stay unfunded for the time being unless the government shows a comprehensive economic plan," Badaro argued.

Watch video 02:28

Lebanon: Economic crisis hits the poor

Leila Dagher, associate professor of economics at the American University of Beirut and senior fellow at the Lebanese Center for Policy Studies, told DW that besides using SDRs, the government could have other options if it reached an agreement with the IMF.

While beneficiaries of the ESSN project will get paid in dollars, those who will have access to the ration card program could receive payments in dollars or the Lebanese pound at the central bank's Sayrafa rate, which is lower than the real market's rate.

Asked why the government hadn't specified in which currency it would pay those eligible for the ration card program, Dagher explained that the disbursement currency had been a hotly debated topic among politicians for months. "The decision should be based on the advice of experts in the field, and I am positive that all experts would recommend paying in US dollars," she said.

For Badaro, the ration card program doesn't have to be sustainable. He thinks it should be available only for a transitional period until the government reaches an agreement to reconstruct Lebanon's economy. "Otherwise, we'd be pushing people toward mendicity," he said.

Households can apply for both the ration card program and the ESSN project. But Dagher says once the applications are processed, each household would be informed which program they are eligible for, if any. "This minimizes potential double-dipping. Moreover, the requirement of submitting a copy of a valid photo ID for each household member also helps avoid any misuse," she said.

Watch video 03:14

'Lebanon is today living a national trauma'

The Hezbollah factor

Although economist Badaro thinks the government may have some ideas on how to restructure the nation's debt, he said for as long as Hezbollah remains part of the government, it wouldn't allow measures that could hurt its constituency. "I don't think there will be a feasible economic plan as long as Hezbollah is in the government," he insisted.

The government hasn't met for more than two months due to the political polarization around the Beirut blast probe as Shiite parties Hezbollah and Amal request the removal of judge Tarek Bitar. The jurist had come under attack from influential political forces, as well as from religious leaders in Lebanon because he had summoned ex-ministers and senior security officials while investigating the blast.

A poster with a picture of Judge Tarek Bitar is set on fire by supporters of the Shiite Hezbollah and Amal groups, during a protest in front of the Justice Palace, in Beirut, Lebanon, on October 14, 2021.

Clashes broke out in Beirut in October as Hezbollah supporters were protesting against Judge Tarek Bitar who's investigating last year's deadly seaport blast

As a result, most economic and financial initiatives to unlock the IMF financial package have not yet materialized. But the government hopes to reach an agreement with the IMF by the end of the year.

Edited by: Hardy Graupner, Ashutosh Pandey