For Neji*, the two-room apartment he shares with seven other men was supposed to be a refuge. Six years ago, he fled his home in Syria to escape the bombings that haunted ordinary life there. Last month, he narrowly survived the shockwave from Lebanon’s largest explosion as it tore through his neighborhood a mere kilometer away from the port, smashing windows and causing buildings around him to crumble.

“All of our windows are destroyed, door locks broken, the walls have cracked, and parts of the roof in the kitchen have collapsed,” Neji says. “We need urgent repairs ahead of the winter but with no jobs and income we can’t afford to repair all the damage. Water is leaking from both the ceiling and the walls. We don’t live in dignified conditions, but we can’t afford to move either.”

Neji was subsisting on informal work at the port. Work had already started to dry-up as the COVID-19 pandemic began to spread through Lebanon earlier in the year. The explosion has now caused a total loss of income. He does not know if he will be able to pay his rent anytime soon and wonders how long his landlord’s patience will last. It’s the story of thousands of people, and refugees in particular, in Lebanon, who, for several months, have struggled as three different crises have conspired to leave the country on edge: an unprecedented economic crisis, a pandemic, and the world’s third largest explosion.

50 percent of Lebanon in poverty

Since the August 4 explosion, it is estimated that more than 70,000 people have lost their jobs. The devastation wrought by the shock waves has put thousands of businesses at risk. Many now fear they will not have enough to eat, with the price of common goods rising as the Lebanese lira languishes at a fifth of what its value was a few months ago. Those with savings in their bank accounts cannot access them due to the banks’ restrictions.

Even before the blast, Lebanon was on its knees. A prolonged economic crisis worsened by the corona virus pandemic has resulted in a rise in poverty rates across the country. Already in April 2020, in a survey conducted by CAMEALEON, a Norwegian Refugee Council (NRC)-led research network, 96 percent of Syrian respondents from the Bekaa and North of Lebanon, reported that the COVID-19 pandemic had negatively affected their ability to find work.

Recent surveys put more than 50 percent of the population below the poverty line, with 23 percent of Lebanese facing extreme poverty. For Syrian refugees, the figure is even higher, with 83 percent living below the extreme poverty line. Poverty amongst Palestinian refugees is also expected to increase. And the sharp rise in corona virus cases across the country will only add more misery to an over stretched health system while measures to curb the spread of the virus will further negatively impact businesses and livelihoods. During NRC’s recent assessment of families’ needs in Karantina, an area near the port where NRC is responding to the aftermath of the explosion, 95 percent of responders with chronic medical conditions said they cannot continue their treatment because they can no longer afford it.

Lebanon needs long-term aid

The immediate effect of the explosion has been a shocking rise in homelessness, affecting up to 300,000 people. Thousands of homes were badly damaged, but the economic reality means that many will not be able to repair or even return to their homes. The funding for the shelter response has also not hit the ground fast enough, with only 7.5 percent of the UN flash appeal disbursed at the time of writing. As we warn, this may mean tens of thousands of people made homeless by the explosion in Beirut risk being left out in the rain and cold unless aid funding is stepped up immediately.

And to add further stress to families affected, the NRC has already documented a sharp increase in threats of evictions and actual evictions by property owners before the blast. With the economic disaster affecting everyone, both parties are facing grim prospects: tenants cannot afford the rent, and their landlords need the income.

This is not a crisis from which Lebanon will emerge anytime soon. The full consequences of the economic, health and physical devastation are yet
to become fully apparent. It is tragic that it took an explosion of such magnitude to call the world’s attention to what Lebanon has been enduring for several months now. The outpouring of sympathy has been encouraging, but it threatens to fade away before the necessary political reforms are implemented and the country begins to get a fraction of the assistance that it so desperately needs.

While welcome, the pledges of emergency assistance from the international community have scarcely even addressed the immediate needs of people in Lebanon, including its refugees and migrant worker communities. The devastation wrought by the explosion alone is estimated to reach into the billions of dollars. Beyond the repair and reconstruction that needs to take place, there are deeper crises that demand more sustained, longer-term international attention: shortages of food, electricity, jobs and homes. The country needs long-term aid that supports rebuilding livelihoods and kick-starting early recovery.

Structural changes must also not be neglected, and the people’s voices and demands for accountability need to be heard. No country has been more generous in opening its door to refugees than Lebanon. It is crucial that Syrian refugees, who have befallen yet another tragedy, continue to receive the assistance that they need, but also that vulnerable Lebanese communities and migrant workers, who share many of the same tribulations, are also supported. Without long term international assistance and much needed reforms, Lebanon may see further entrenched poverty and prolonged suffering across the country.

*Name changed to protect identity

“We, the Syrian refugees in Lebanon, cannot take it anymore as the hunger is in our body, and the body of our children was ruined because of the lack of food and the quarantine. The evidence of our commitment to the general mobilization and the quarantine is that none of the refugees caught the virus. We committed and prevented the spread of the Coronavirus, but where is your commitment to us especially in this holy Ramadan month?”

Cited above is the message sent by more than one hundred Syrian refugees in Lebanon to UNHCR in mid-April 2020. It echoes the call of hundreds of thousands of other men and women living as refugees in villages and cities across Lebanon. Years of displacement with few possibilities to earn a stable income, coupled with monthly payments of rent, food, medicine and other basic expenses, has depleted any savings refugees carried with them as they fled to Lebanon. Instead, most have built up hefty debts to landlords, shop keepers, relatives and people in the community who have been kind enough to lend some money.

The conflict in Syria has imposed a heavy economic and social toll on Lebanon with decreasing transit trade through Syria between 2010 and 2018, and stalling service exports like tourism, as highlighted by the World Bank in The Fallout of War: The Regional Consequences of the Conflict in Syria. The marginal effect of the trade shock on GDP reached –2.9 percentage points in Lebanon between 2012 and 2018, while the refugee arrivals boosted GDP by 0.9 percentage points by increasing aggregate demand and labour supply.

Lebanon remains host to the largest refugee population per capita in the world, with an estimated 1.5 million Syrian refugees, around 16,500 refugees of other nationalities, and more than 200,000 Palestinian refugees, according to the Lebanon Crisis Response Plan (2017-2020). The solidarity shown by Lebanon and its people is remarkable and has been praised across the world as a contribution to the ‘global public good’ by the World Bank. The Lebanon crisis response has served as a model for the Global Compact on Refugees affirmed by the UN General Assembly in December 2016 and secured over $8 billion in funding since 2011 from the international community, according to Inter-Agency Coordination Lebanon.

Thanks to this, it was for some years possible to mitigate a sharp rise in poverty through a humanitarian safety net providing multipurpose cash and food assistance to the most extremely vulnerable families, and subsidizing health care.

But the socioeconomic impact of the economic crisis in Lebanon, COVID-19, and most recently the devastating port explosion in Beirut on August 4, 2020, has tested the existing safety net to its limits and revealed its insufficiency in the new reality.

Data collected in April and May 2019 by UNHCR, UNICEF and WFP for the 2019 Vulnerability Assessment of Syrian Refugees (VaSyR) found that
55 percent of the Syrian refugees were at that time living below the extreme poverty line (USD 2.9/ day) and 73 percent below the poverty line (USD 3.8/day).

Since then, the people in Lebanon have endured crisis upon crisis. The Lebanese pound (LBP) has lost nearly 80 percent of its value against the USD and the Consumer Price Index (CPI) has more than doubled between July 2019 and 2020, according to the Central Administration of Statistics. Moreover, Covid-19 lockdown measures have further accelerated the loss of jobs. Surveys conducted by UNHCR Lebanon between February and August 2020 with more than 22,000 refugee households show that around 65 percent have lost their livelihoods during this period and 70 percent of Syrian families have no working member.

The loss of incomes, coupled with the devaluation of the Lebanese pound and the simultaneous rise in prices has led to a dramatic rise in poverty over a short period of time, and an increase in debt. UNHCR’s surveys show that 92 percent of Syrian refugee families and 71 percent of refugee families of other nationalities have incurred new debt since March 2020, as they have been forced to borrow money to pay for basic needs like rent and food.

Today, well over 80 percent of the Syrian refugees are living below the extreme poverty line. At the same time, the funding available for humanitarian assistance reaches 31 percent of the total number of Syrian refugee families with monthly multipurpose cash and food support, and an additional 17 percent with food assistance only.

To cope with the extreme poverty, families are reducing their food consumption and spending on health care, at the same time as more and more are being evicted from their homes because of inability to pay the rent.

The situation is particularly acute for elderly refugees and those with a disability or a critical medical condition. In our surveys, this target
group reports lack of food (87 percent), shortage of medicines (65 percent)
and inability to afford health-related costs (60 percent) as their main
concerns. Poverty has also compelled many parents to take their children out of school to work in exploitative conditions. The risk is even higher this
academic school year when there is the additional challenge of managing online schooling.

These negative coping strategies will have longer- term negative effects on people’s physical and mental well-being and children’s development and possibility of future success.

A recent illustration of the desperation is the spike in refugees trying to reach Cyprus by boat to seek international protection or reunification
with family members living there, citing the sheer inability to survive in Lebanon as the main motivating reason. Since mid-July, hundreds of Syrian refugees, as well as a growing number of Lebanese have attempted to escape the hardship in this dangerous way. A few have made it, but the majority have found themselves in distress at sea and a number, including children, have lost their lives.

Reversing the rise in poverty and the erosion of resilience against a multitude of risks requires not only an expansion of existing programs that
alleviate the impact of poverty, but also new approaches. In formulating its approach and advocacy, UNHCR is guided by the Global Compact on Refugees that looks at comprehensive and whole-of-society responses to refugee situations. UNHCR also uses the 2030 Agenda for Sustainable Development, which recognizes that its goals and targets should encompass all people.

While it could appear counterintuitive, in times of shrinking resources and economic downturn, the inclusion of refugees in economic activities and
social protection not only contributes to recovery, but is also key to the realization of solutions for refugees outside Lebanon. This has been documented by various studies like Impact of Humanitarian Aid – UNDP and UNHCR (2015); The Mobility of Displaced Syrians (2019) – World Bank; and The Fallout of War (2020).

OUR RECOMMENDATIONS

1. Include refugees in economic growth and job creation strategies to enable them to become contributing and self-sustained members of a society that needs to recover, generate new infrastructure and reinforce its productive sector. It has been amply demonstrated that economically active refugees are consumers, and more confident in their capacity to repatriate and re-establish themselves and provide for their families back home, compared to families who have been depending on aid.
2. Include refugees in social protection frameworks and programs to enable their equal accessin policy and practice – to basic services, including social services, health care and education. The internationally defined “social protection floor” is for all human beings, regardless of their nationality or status.
3. Expand the cash safety net for vulnerable refugees and Lebanese who cannot support themselves while the economy recovers. They cannot wait any longer. The existing cash safety net for refugees is grossly insufficient, as indicated earlier, and needs sustained humanitarian funding. It simultaneously needs to be expanded through contributions from development funding sources, because this is about chronic poverty alleviation. Furthermore, the safety net for refugees needs to be consistent with an expanded safety net to alleviate the poverty of a growing number of Lebanese.

Around 50 percent of Lebanese are estimated to now be living in poverty and the competition for resources for survival between people and communities is becoming increasingly fierce and fueling tensions. The safety net for Lebanese is at best embryonic and needs a major overhaul, now. Supporting one community in need and not another can only fuel inter-communal tensions and feelings of injustice and neglect. In order to prevent a further deterioration of services and instability in Lebanon that will take long to reverse, efforts should focus on developing a medium- term strategy to both address structural problems and mitigate the adverse effects of the crises on individuals, whoever they are. Creating conditions in which these men, women and children can live safe, secure and dignified lives and develop their human capital will benefit both Lebanon and its recovery, and the development of the refugees’ home country.

Over the past year, Lebanon has experienced an onslaught of multiple growth shocks including a banking and exchange-rate crisis, an outbreak of COVID-19, and an explosion that has claimed large swathes of Beirut’s commercial centre and a bulk of trade facilities.

These new shocks add to the longer-standing economic and financial crunch that have swelled Lebanon’s poverty rate at the upper, or moderate, national poverty line ($14/day), as well as the lower, or extreme, poverty line ($8.5/day) identified by the United Nations Development Programme and the Government of Lebanon. Since the start of this year, the moderate poverty head count is projected to have nearly doubled, and extreme poverty nearly tripled. At the same time, the mass of the middle- income and wealthy individuals, as estimated from the full distribution of incomes and wealth in Lebanon, has contracted due to the collapse of the banking system and out-migration.

This implies that the recent shocks have caused not only a humanitarian tragedy at the bottom of society, but also perilous attrition of physical, human and entrepreneurial capital higher up in the social ladder. This places hurdles in Lebanon’s course to lifting the downtrodden out of poverty and returning on a growth trajectory. Public, private and civic sectors need to coordinate to implement a comprehensive yet politically feasible policy response, and different socioeconomic groups must band together to assuage the devastation and deprivation among the least fortunate and the opportunity-trapped.

Background

Since at least the mid 2010s, the Lebanese economy has been on a downward spiral due to exhaustion of the country’s growth model, which had been relying on inflow of remittances and speculative investments. The decline was partly related to the developments in the region at large: the influx of Syrian refugees; the drying out of remittance inflows in connection with the fall of Gulf oil prices; and a decline in tourism and private investment from the Gulf Cooperation Council (GCC) countries.

Remittance inflows fell from over 20 percent of GDP pre-2010 to around 13 percent in the years since 2017. Foreign direct investment fell from over 11 percent of GDP pre-2010 to less than 5 percent since 2017. These factors have added pressure to the balance of payments leading to a deteriorating fiscal position and a sovereign debt crisis. In Spring 2020, for the first time in Lebanon’s history, the country defaulted on its debt-service obligations.

Since August 2019, the Lebanese Lira (LL) to USD market exchange rate started deviating from the official pegged rate of 1,500 LL/USD. The market exchange rate reached 2,200 in January, and briefly as high as 10,000 LL/USD in July 2020.

In October 2019, the Lebanese economy suffered more because of heightened political instability and public demonstrations, which added pressure to the pegged exchange-rate and in turn on bank dollar reserves. The demonstrations persisted into January 2020, and only temporarily subsided with the election of the new government in January, and after that, the onset of the COVID-19 lock down.

The effects of the COVID-19 pandemic started bearing down on the Lebanese economy in February, as travel and shipping from East Asia and Southern Europe became restricted. Economic lock down was imposed in March starting with public institutions, but within weeks, extended to most establishments and public spaces. National land and sea borders and airports were closed from the middle of March to the end of June (beginning of September in the case of land borders), halting the inflow of raw materials, essential goods and foreign currency. Cargo imports through the port of Beirut, before the explosion, had already contracted by half.

During the lock down, the market exchange rate rose from 2,470 LL/USD on 1 March, to 8,600 LL/USD on 30 June. The internal lock down directly affected Lebanese households’ immediate consumption and capacity for income generation, and through multiplier effects even their longer-term consumption, investment and income. Aggregate demand collapsed. Because of the currency devaluation and the restriction of imports, consumer prices shot up, by 107 percent between December and August alone. In some categories prices more than quadrupled, including for restaurants and hotels (495% rise), food (317%), clothes (325%), alcohol and tobacco (324%), and furniture (567%).

On the heels of this retrenchment came the Beirut Port explosion, leaving the preeminent trade and shipping hub, as well as the neighboring industrial, commercial and residential zones in ruins. This will not only gobble up $4-5 billion for reconstruction and humanitarian assistance, but it will dampen Lebanon’s imports, exports, and other economic activity for months to come.

Impact across income groups

Given the unprecedented events in Lebanon in the first half of 2020, and their mutually reinforcing effects, the poverty rate according to the upper or moderate poverty line is projected to have near doubled from 28 percent in 2019 to 55 percent by May 2020. Correspondingly, extreme poverty near tripled from 8 percent to 23 percent. This brings the total number of poor among the Lebanese population to an estimated 1.1 and 2.7 million for the extreme and moderate poverty lines, respectively, even before the devastation brought by the Beirut Port explosion.

These numbers suggest that some 750,000 Lebanese fell into extreme poverty – and 1.35 million into moderate poverty – in the first half of 2020, compared to the reference pre-COVID-19 growth scenario for 2020 that saw the number of the extreme poor at 370,000 and the number of the moderate poor at 1.32 million.At the same time as the ranks of the poor have swelled, middle-income social groups have contracted from over 57 percent of the population in 2019 to less than 40 percent, projected as of May 2020, as living means withered. The real challenge facing Lebanon is that these groups, which represent the bulk of the country’s human and entrepreneurial capital, may shun the uncertain economic opportunities in Lebanon under an expected protracted recovery, and may emigrate to the Gulf or beyond, should opportunity arise.

Another indication of the magnitude of the economic shock brought on by the not-legalized banking controls, the currency devaluation and the COVID-19 measures, is that the income-affluent group (individuals with more than $34/day in income) is also projected to have shrunk significantly from 15 to 5 percent of the population. Moreover, the impacts of economic shock are not restricted to income and consumption flows during 2020, but extend to the stocks of available economic resources (even before the blow that the Beirut blast dealt to the capital city’s infrastructure). Households and firms have experienced depletion, devaluation and freezing of their productive assets, which heightens their present deprivation and affects their longer-term ability to cope and spring back.

Since poorer households are more likely to hold their wealth in the devalued local currency, and may need to sell off their assets (or fail to upkeep them) to fund their consumption, wealth inequality in Lebanon may increase. For reference, Lebanon has one of the most unequal wealth distributions in the region and the world, ranking twentieth worldwide with a wealth Gini coefficient of 81.9 percent, and one of the highest concentrations of billionaires per capita.

The top 10 percent of Lebanese adults owned 70.6 percent, or $151.4 billion, of all estimated personal wealth in the country in 2019. As of mid-2020, the wealthiest 10 percent are projected to hold $90.8 billion of wealth, 40 percent down year-on-year. This is a result of the banking crisis, the associated restrictions on access to financial wealth, and the expected drop in the value of high-end land, real-estate property and natural resources. The Beirut Port explosion is expected to further diminish firms’ and individuals’ holdings of real estate and other capital, and their capacity for trading and economic activity.

The existing conditions spell havoc for Lebanon’s ability to achieve economic recovery with an adequate supply of domestic investment and decent jobs, and retain its predominantly middle-income population status.

Scope for alleviation

Despite the enormity of the economic shocks and their ripple effects, Lebanon could rebound and close its poverty gap quickly if key markets successfully kick start, if macroeconomic stability is restored, and if necessary economic governance reforms are enacted by the incoming administration. A primary policy response toward solving the country’s humanitarian crisis should involve bolstering Lebanon’s food and health security and social protection. This should be achieved by ensuring adequate access to food, medication, unemployment benefits and cash.

The establishment of a national solidarity fund should bring the country closer toward alleviating extreme and even moderate poverty. In addition to reaching out to international donors in the post- COVID-19 and post-explosion environment, Lebanon should mobilize its own substantial resources, with a fair and progressive system of shared responsibility, supported by political will and strong institutional capacity to ensure social solidarity. With shared responsibility and societal solidarity in place, especially between the wealthiest top decile and the poor, the bulk of the poverty impact can be absorbed.

Based on the distribution of wealth in Lebanon projected as of May 2020, it appears that a solidarity fund financed solely or primarily by a modest levy on the wealthiest 10 percent of nationals would go far toward eradicating poverty in the country. To close the extreme poverty gap, the required levy would be around 1 percent of the total assets held by the richest 10 percent (compared to 0.2 percent in 2019). To close the moderate poverty gap according to the national poverty line, the corresponding levy would have to be approximately 3.6 percent of the total assets held by the richest decile (1 percent in 2019).

Enacting these fiscal policies should go hand in hand with the introduction of the necessary economic governance reforms. Enhancing transparency and accountability should allow the ministries of finance, social affairs and related institutions to improve poverty targeting practices.