Home Last Word Taking the local path towards enhanced economic security and urban stability

Taking the local path towards enhanced economic security and urban stability

The local path to financial security and urban stability

by Taina Christiansen

In Lebanon, nearly 90 percent of the population live in urban areas, making it a country of cities. Therefore, applying an urban lens onto the future economic – and social – stability of Lebanon, where localized urban investments are seriously considered and encouraged, must be at the heart of Lebanon’s sustainable and inclusive tomorrow. Local economic development and investment, where local dynamics and the involvement of respective authorities and stakeholders are at the centre, should be a key consideration within the overall ongoing deliberations of macro-economic reforms in Lebanon. 

Urban social stability and safety is intricately linked to people’s inclusive access and rights to key basic services, such as housing, water, electricity, infrastructure, public spaces, education, health and more. In Lebanon, this is no exception. Haphazard urbanization and expansion of informality across Lebanese cities, coupled with historical mass internal and external displacement – amongst other factors – has made it challenging for government institutions at national and local levels, to resolve or at least mitigate conflicts over land, resources, property rights and equitable services for urban inhabitants. Appropriate economic management in Lebanon can tap into strategies that improve efficiency of revenue collection (as part of a broader financial strategy) and contribute to the beginings of a renewed social contract – which in turn can improve urban affordability for the poor, and contribute to enhanced social stability and safety. 

Financing sustainable urbanization is an investment in Lebanon’s present and future. Lebanese local government capacity must be expanded to harness private sector participation, leverage local assets through value capture, and partner with the central government to invest in urbanization. At the global level, United Nations member states have clearly committed to this through the New Urban Agenda, where the need for a strong municipal finance system is clearly highlighted as a requirement for advancement towards the Agenda 2030 for Sustainable Development. Lebanon’s 1977 Municipal Law outlines the range of sources of finance available to municipalities. This includes fees collected by the central government on behalf of municipalities in an Independent Municipal Fund (IMF) – managed by the Ministry of Interior and Municipalities and Ministry of Finance – which in theory sees funds redistributed back to municipalities and unions of municipalities. In practice municipalities rely largely on funds from the IMF, some more than 30 percent, others up to 70 percent and smaller municipalities almost entirely. However, these allocations have been beset by delays – for multiple reasons – even prior to the ongoing economic crisis, and current distributed allocations are on hold. Local authorities have thus sought international assistance to finance part of this gap, even more so since 2019 (with a previous increase since the onset of the Syrian displacement crisis in 2011), through innovative ways to support municipal finance and capacity building in order to enable service delivery and contribute to social stability through investments in Lebanese cities and localize development and humanitarian assistance. 

The system for financing local governance and development in Lebanon stands to benefit from a comprehensive overhaul to move closer towards self-sufficiency of municipal services. Doing so, will afford local authorities a real chance in addressing local social instability in a bottom-up approach. As summarised in the UN-Habitat Lebanon and ESCWA State of the Lebanese Cities Report 2021, a key aspect of national and sub-national public finance reform, must re-consider the fairness of the intergovernmental grant system to better take into account actual differences in local needs: “A particular and well-known source of bias in the budget allocation is its blindness to the pressure on municipal services exerted by people who are not registered in a given municipal jurisdiction. This mismatch, which disproportionately affects urban communities, is symptomatic of complex issues spanning voting rights reforms, lack of national population data, and the long-term policy approach to rights afforded to non-Lebanese nationals. This suite of recognized issues may find traction as part of the overall governance reforms.”

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Taina Christiansen

Head of UN-Habitat’s Country Programme in Lebanon

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