• Economy
    Nov 11, 2021

    Raising the Alarm: Pervasive Poverty and Vulnerability in Lebanon

    • Fadi Nicholas Nassar, Sarah Hague, Walid Sayegh
    Raising the Alarm: Pervasive Poverty and Vulnerability in Lebanon
    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. (AP Photo/Hussein Malla)
    To support the UN Special Rapporteur on extreme poverty and human rights, Olivier De Schutter, in his official visit to Lebanon, LCPS’s Senior Researcher Fadi Nicholas Nassar teamed up with UNICEF’s Sarah Hague and Walid Sayegh to pen an analysis on the pervasive state of poverty and vulnerability in Lebanon and the socio-economic implications of the country’s rapidly deteriorating crisis.
    Lebanon’s economic meltdown has had near irreversible consequences on critical sectors of the economy. The country’s descent into economic collapse has been quick and disorienting, with GDP per capita plunging to a 20-year low in less than two years. Households and individuals from different age and income groups saw a drastic drop in their purchasing power, wellbeing, and opportunities as the acute financial crisis led to more than 90 per cent drop in the value of the local currency, severe shortages in basic goods, and a breakdown in the delivery of public services. The ILO has estimated that income vulnerability increased to 75 per cent from 51 per cent, while extreme income vulnerability more than doubled to 32 per cent.
    Persistent failures by the Government of Lebanon (GoL) to put the country on the path of recovery have been disastrous. The World Bank has described this lack of action as deliberate, given that interventions to halt the economic decline would have entailed major financial losses by influential individuals and institutions. As a result, the burden of the crisis has been highly imbalanced, falling the hardest on those who were already poor or suffering from previous lifecycle vulnerabilities. With a deeply flawed social protection system, healthcare, education, electricity, clean water, adequate housing, transportation, and decent jobs have become only accessible to the few.
    The severity of the crisis and lack of action by policy makers has naturally generated a larger crisis of confidence, leading to a massive exodus of students, workers, and investors, forewarning of a long-term decline in human capital and further reducing prospects for recovery. The World Bank estimates that Lebanon may need 12 to 19 years to recover to its pre-crisis per-capita GDP.
    Today, the pathway out of Lebanon’s poverty trap requires an urgent scaleup of social assistance and an overhaul of its social protection system to ensure that future generations are not lost to a cycle of intergenerational poverty. This however will require economic stabilization and the mobilization of sufficient resources, which in turn necessitate a fundamental restoration of confidence in the country’s institutions and economy; a momentous feat that may only be achieved by addressing the GoL’s legitimacy crisis.
    The State of Poverty and Vulnerability in Lebanon
    Poverty has hit households hard in Lebanon in the last two years. A recent assessment by ESCWA, found that “the poverty rate in Lebanon doubled from 42 per cent in 2019 to 82 per cent of the total population in 2021, with nearly 4 million people living in multidimensional poverty. They represent about 1 million households, including 77 per cent, or approximately 745,000, of Lebanese-national households.” ESCWA’s report helps underscore the widespread deprivation that households across Lebanon are facing when it comes to access to critical resources like electricity, water, education, health, and housing, among others.
    Other studies on access to resources that are fundamental to securing a dignified life also draw attention to the interrelated effects of the country’s multiple crises. A 2021, Rapid Damage and Needs Assessment of the Education Sector by the AVSI Foundation contended that: “The quality of learning in schools has decreased and access to in-presence and distance learning is hindered by issues such as transportation and electricity.”
    Shortages in fuel—for electricity and transportation—as well as other critical goods, were drastic in 2021. Power supply by Electricité du Liban dropped to as low as 2 hours per day nationwide, while an almost 15-fold surge in the price of diesel in the ten months up to October 2021—from LBP 17,360 / 20 liters to LBP 274,000 / 20 liters—left electricity from alternative private sources, unaffordable for most households, businesses, and service providers.
    The healthcare sector was particularly hard-hit. On top of electricity and fuel shortages, major deficiencies in medicines, medical supplies, and staff “left some hospitals operating at 50 per cent.” Those conditions put the entire population, and particularly vulnerable groups at risk, including persons with disability and an estimated 450,000 persons with chronic illnesses.
    Even with the continuation of some medical services, acute price inflation, estimated at more than 468 per cent between 2018 and September 2021, and an almost 18-fold increase in the prices of food, forced households to make difficult decisions in prioritizing spending on their vital needs. Small-scale surveys, such as one conducted with households benefiting from UNICEF’s Haddi cash child grant, showed that 76 per cent of respondents postponed healthcare visits in the past six months, while 93 per cent reduced the amount of food or number of meals for their children. Other surveys indicated that almost 60 per cent of Lebanese households have recently had to buy food on credit or borrow money, and that more than one-third of children regularly skip meals. More than one in every seven households have had to completely cease their children’s education and one in ten have sent their children to work, highlighting the absence of adequate social protection.
    Collapse of Critical Sectors
    The unabated deterioration in macroeconomic and financial conditions today risk a wider halt in service delivery and the disastrous social cost of a long-term decline in the health, education, and opportunities of future generations, cementing the drastic rise in monetary and multidimensional poverty. The surge in fuel prices following the full lifting of subsidies, and prior to the initiation or major scale-up of a social assistance program, has left households without electricity, at risk of losing access to safe water, and unable to afford healthcare or send their children to public schools.
    Power and fuel shortages, needed for functional public water systems, risk depriving more than two-thirds of the population of safe water for drinking and sanitation. The cost of water provision from alternative sources, or private suppliers, is estimated at almost twice the minimum wage. Food safety has also become a concern, whereby cases of food poisoning are reported to have increased due to the lack of adequate storage and refrigeration. While there is no accurate data on those cases, some hospitals reported that up to five cases per day required emergency hospitalization in the month of August, a time when the health sector was also suffering from critical shortages in power, medicines, and medical supplies, in addition to COVID 19 related hospitalizations.
    In the education sector, the monthly cost of reaching school surged to almost 1.5 times the minimum wage, or LBP 900,000, according to UNICEF field surveys across Lebanon. Reaching school only represents a fraction of education-related costs. Including books and materials, now priced at the black-market exchange rate of around US$/LBP 21,000 (November 2021), monthly costs exceed twice the minimum wage.
    The unaffordable cost of transportation also impacts workers whose incomes have remained unchanged in the past two years, including among others public sector teachers, healthcare, and social workers. Private sector workers, particularly those who are informally employed and have little to no rights and benefits—almost 55 per cent of the labor force—are now significantly worse off. Prior to the lifting of fuel subsidies, the ILO had estimated that almost three-quarters of individuals live in income vulnerability, on less than LBP 706,050 per month, now equivalent to the cost of slightly more than 40 liters of gasoline. Meanwhile, without wide-ranging reforms to stabilize the exchange rate, inflation is expected to continue cutting the purchasing power of workers, even against a correction in wages that would translate to an increase in money supply and to prices of goods and services, leaving particularly those who suffer from lifecycle vulnerabilities that prevent them from income generation worse off.
    The shocks brought on by the country’s economic collapse have had disproportionate effects on vulnerable groups left exposed by systemic inequities and lacking social protection schemes.  Even before the crisis began, more than two-thirds of persons with disability (PwDs) were in the bottom income quintile of the population. With no formal financial support channels, and losses in informal ones, PwDs and other vulnerable groups, including the elderly, women and men who are primary caregivers for children or dependent family members, are in urgent need of social assistance to meet their most basic needs. Highlighting the consequences of the combined effect of the country’s crisis on existing gender inequalities in the country’s economy, a recent World Bank and UN Women gender assessment on Lebanon found that the majority of women are jobless, with 75% of women economically inactive.
    With that said, the country’s insolvency and drastic decline in infrastructure, including that of the financial sector, which is crucial for economic activity and the delivery of social aid, is also at risk of collapse. In recent months, when the electricity crisis was at its worst, power was rationed even at ATMs of some banks across the country, making it difficult for many businesses to operate, and for aid beneficiaries to access their assistance. Internal and overseas cash transfers, whether from family, friends, or international organizations, are essential for the survival of many households and individuals who have no other means of support. As inflows of remittances and international aid account for almost 45 per cent of nominal GDP at current prices[1] in 2020—remittance inflows were estimated at US$ 6.9 billion in 2020, whereas international aid reached US$ 1.7 billion—they also play a vital role in financing crucial imports and mitigating devaluation.
    A Broken Social Contract: An Economy in Need of Saving
    Against the sharp decline in purchasing power and mounting hardships, skilled workers in key sectors are increasingly fleeing the country in search of better opportunities. Thousands of health workers, teachers, and other professionals are estimated to have emigrated in recent years, a trend that accelerated following the Port of Beirut Blast. While there are no accurate numbers on emigration, various syndicates have indicated that thousands of workers have left the country from 2019 to-date, including the doctors and nurses syndicates. Moreover, 2020’s Arab Youth Survey also indicated that around 77% of Lebanese youth aim to migrate from Lebanon, forewarning of a long-term decline in human capital development and a significant rise in intergenerational poverty.
    The continued failure by the GoL to take corrective measures to stabilize Lebanon’s rapidly deteriorating depression and restore confidence in the state by implementing reforms that safeguard against the underlying drivers of the country’s crisis, such as corruption, mismanagement, and the insolvency of public institutions are undermining public confidence in the core pillars of the state, its economy, and the country’s social contract.
    The very foundations needed to maintain a functioning modern state, all fundamentally dependent on trust and credibility, are deteriorating to near breaking point.
    The rapid unravelling of Lebanon’s economy makes clear the urgent need for economic and financial stabilization to ensure the protection of vital imports and services, a key lifeline to an economy in crisis. To buoy against the dire humanitarian consequences brought on by pervasive multidimensional poverty, any stabilization measures must coincide with the establishment of comprehensive and sustainable social protection strategies and the provision of urgent assistance to vulnerable groups.
    However, the only way to resuscitate Lebanon’s economy is through the implementation of immediate and credible institutional reform, and embarking on a path towards people-centered recovery. It is only by upending the very deliberate nature of Lebanon’s depression—the persistent failure of the country’s leadership to take decisive action to avoid the worst of the country’s crisis, protect the most vulnerable, and lead the country towards recovery—that Lebanon can be saved from descending further towards a complex emergency.

    [1] Nominal GDP in 2020 was estimated at US$ 19.01 billion in 2020 (IMF)
    Fadi Nicholas Nassar is a research fellow at the Lebanese Center for Policy Studies (LCPS). His research focuses on international humanitarian and relief interventions in fragile and conflict settings, popular uprisings and social movements, and Lebanese and Middle Eastern politics. He is Assistant Professor of Political Science and International Affairs and Director of the Institute for Social Justice and Conflict Resolution at the Lebanese American University (LAU). Fadi holds a PhD from the War Studies Department at King’s College London. A graduate of Georgetown University’s Edmund A. Walsh School of Foreign Service, he also received a Master of Public Administration from Columbia University.
    Sarah Hague Chief of Social Policy for UNICEF Lebanon Country Office
    Walid Sayegh  Economic and social policy specialist at UNICEF Lebanon
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