The Ration Card: A Response to the Economic Crisis in Lebanon. To what extent are cash transfer programs effective?

Introduction

Over the past two years, Lebanon has been suffering from the worst economic and financial crisis since the end of the civil war. The Lebanese pound has lost over 90 percent of its value against the US dollar, and “much of the public life has been paralyzed due to power cuts, staggering food and fuel inflation, and medicine shortages” ^[1]. This is occurring at a time when people are still bearing the brunt of the COVID-19 pandemic and the aftermath of the Beirut port blast that took place on August 4^th, 2020. According to a recent study by ESCWA, the multidimensional poverty rate in Lebanon doubled from 42 percent in 2019 to 82 percent of the total population in 2021, with 74 percent of the population witnessing an increase in income poverty^[2]. As a result, and in the absence of national  universal social security services and rights, the economic crisis has forced many households to rely on in-kind donations (food, medicine, clothes, etc.) as well as cash assistance to be able to meet their basic needs. These various forms of social assistance are usually distributed through NGOs, international organisations, individual initiatives, political parties, or the government.

This brief critically examines the “Ration Card” cash transfer program that was recently issued by the Lebanese government to assist the poor and vulnerable Lebanese population affected by the ongoing economic crisis. I argue that  although cash transfer programs aim to provide quick relief to families, the Ration Card Program (RCP) offers very little support to beneficiaries, and excludes a large section of the population through its eligibility, registration, and implementation mechanisms. It is also important to note the RCP, and emergency cash transfer schemes in general, are not sustainable in nature and not sufficient on their own without broader national social protection programs, as pillars for a just and reimagined social contract in the country.  

Ration Cards

General Overview

As Lebanon currently faces multiple overlapping crises, a majority of the population is experiencing an increasing risk of income insecurity and a plunging purchasing power due to rapid inflation. In parallel, the same working conditions of many employed individuals persisted with an invariable minimum wage standing at LBP 675,000 per month. A recent study by the International Labour Organisation (ILO) revealed that around 54.7 percent of employed individuals were paid less than LBP 780,000 per month^[3].

After years of social policy inaction, the government introduced the “Ration Card”, a one-year cash transfer program with a planned budget of $556 million set to assist vulnerable people as Banque du Liban (BDL) lifts subsidies^[4] off essential imports such as bread, fuel, and medication^[5]. Previously, the subsidies program, albeit being expensive and regressive, constituted the only form of universal protection in the country.^[6]. The subsidy program costs around 6 billion US dollars per year, with only 20 percent of subsidies benefiting the poorer half of the Lebanese population^[7]. Instead, the wealthiest had the most consistent access to subsidized goods with their purchasing power and ended up benefiting more^[8]. This means that the program did not fairly nor sufficiently support the most vulnerable households and individuals, and it was removed at a time when many were facing food insecurity and a reduced purchasing power.

Known as the “exceptional credit” law^[9], the RCP was originally passed by Parliament as an emergency legislation on June 30^th, 2021. The program aims to provide relief to impoverished Lebanese families and replace subsidies^[10] amidst a worsening economic crisis. Similarly, another cash transfer program was put in place by the World Bank to provide quick relief to those affected by the economic and COVID-19 crises. The Emergency Social Safety Net (ESSN) is a three-year project advanced by the World Bank to support and improve Lebanon’s existing National Poverty Targeting Program (NPTP) with a budget of $246 million^[11]. It targets 150,000 Lebanese families, given that the NPTP has had very limited outreach and as of last year only reached 1.5 percent of the population^[12]. The NPTP was criticised for various reasons, mainly the high operational costs of poverty targeting while offering a very limited amount to beneficiaries^[13]. In addition, it includes targeting errors and exclusion of vulnerable individuals in need of assistance but were omitted by the selection formula and administrative errors. The ESSN then seeks to expand coverage from 1.5 to 20 percent of the Lebanese population^[14], but it does not address the limitations of the NPTP.

The ESSN was initially planned to be implemented in May 2021, but has faced instead prolonged delays since the parliament voted on a draft law that amended the loan agreement without prior consultation with the World Bank, prompting the latter to claim that they did not approve any changes^[15]. Moving forward, and after the parliament passed new amendments to activate the ESSN, the program launched during March 2022. The registration for both the ration card program and ESSN (See Annex) started on December 1^st, 2021, and extended until January 21^st, 2022. The cash assistance is expected to be directly transferred through electronic cards to the most vulnerable households. Even though the “Ration Card” and the ESSN are two separate programs, both their registration processes are done via the same online platform “Daem network” operated by IMPACT^[16]. The platform was previously used for the government’s COVID-19 vaccination program and is under the supervision of the Central Inspection^[17].

Who has access to the RCP?

Given that the RCP is a poverty targeting program, the beneficiaries must meet specified criteria to be eligible for it^[18]. However, compliance with the eligibility requirements, such as having limited income and assets or giving up privacy rights over bank accounts will limit participation and exclude many vulnerable households, especially when the advanced cash incentives are low. Moreover, checking and monitoring eligibility also carries a higher financial and administrative burden and would require an effective state apparatus, which can be challenging to say the least given Lebanon’s dysfunctional state institutions. Some tasks are being managed by the World Food Program (WPF) such as the household verification visits to validate the eligibility of potential beneficiaries to receive the ESSN^[19]. Such measures are not just costly, but they also undermine the trust between the government and the people. In contrast, investing in a universal social protection system contributes to strengthen the relation of trust and build towards a stronger social contract^[20].

Taking into consideration that the majority of the population is now considered poor and as the economic crisis continues to worsen, the complex eligibility requirements set for the RCP exclude many vulnerable groups. The RCP aims to reach around 500,000 Lebanese families, which is a limited outreach given that 4 million people are living in multidimensional poverty, with 1 million poor households^[21]. After the registration closed, the “IMPACT” platform recorded over 582,000 applications for aid, which amounts to almost 1.4 million individuals^[22]. This implies that many households in need of urgent assistance did not register to the programs.

In addition, the number of applications does not mean all of the households will be selected to receive cash transfers; those who do not match the eligibility criteria will be disqualified^[23]. As stated by the World Bank, only 200,000 households met the preliminary screening criteria for the ESSN^[24]. The IMPACT dashboard also shows that at least 114,000 households submitted incomplete applications^[25], which further narrows down the number of people selected for both programs. Overall, this shows that the target population set by RCP and ESSN may not be achieved especially when poverty targeting programs exclude many individuals during the selection process. According to a report by Development Pathways^[26], the targeting nature of cash transfer programmes excludes the majority of people in society, the so called “missing middle”, from social security even though they have low and insecure incomes. This missing middle is deemed as too ‘rich’ to be a recipient of poverty targeting programmes, but is also too poor to be able to afford private service provision or to access or contribute to the  NSSF. In addition, while the RCP is focused on the household level, studies have shown that targeting vulnerable households rather than individuals is unfair^[27].

Furthermore, the RCP covers Lebanese nationals who only reside in the country for a minimum period of six months a year^[28]. Consequently, refugees and migrant workers are excluded from the program. The government claims that these populations are already receiving aid through other organizations, but no official statistics support such an assertion. According to the UNHCR, around 90 percent of Syrian refugees in Lebanon are now living in extreme poverty, which means they cannot access basic food items for survival^[29]. Moreover, families who already benefit from cash assistance programs such as the NPTP are not eligible, despite the fact that the cash received through the latter program is considered a negligible amount of LBP 100,000 or USD 5^[30] per household member each month, with a maximum of LBP 200,000 per household.

In the absence of awareness campaigns, both programs still had limited outreach. Previously, no studies were conducted to ensure if people living in rural areas received sufficient information about the NPTP in comparison to those living in urban areas. If indeed they were not able to access information about this program, the same obstacle had been repeated again with the RCP and ESSN programs. Moreover, many people who do not have digital literacy nor access to devices with an internet service will face difficulties in registration and notification processes. During the registration period, concerns about signing up were voiced by individuals who do not possess identity cards, as well as challenges faced with “moukhtars^[31]” who refused to issue identity cards and asked for money in exchange for helping families to register^[32]. More generally, people are sceptical of these mechanisms, mainly because previous governmental programs were not executed efficiently and instead associated with corruption.

As a result, in the presence of vastly limiting eligibility criteria, many households in need of immediate support will be excluded from the program or will be discouraged from applying in the first place. Instead, it is essential to introduce a universal provision in which all citizens are entitled to receive services and assistance.

The shortcomings of the RCP: Accessibility, Limitations, and Exclusions

Similar to the NPTP and RCP in Lebanon, the efficiency of poverty-targeting cash transfer strategies has been questioned in countries across Latin America and Africa. Over time, global studies have illustrated the problematic nature of poverty targeting that is commonly carried out using Proxy Means Tests (PMTs) to target only those households classified as poor, and often only those living in extreme poverty^[33]. These studies highlight that design errors generate high exclusion errors ranging between 44 percent to 97 percent^[34]. In other terms, many individuals living in extreme poverty targeted by PMTs could be excluded from the program. Taking into consideration the clientelistic culture of service provision in Lebanon and the successive governments’ failure to set and execute effective plans, it will be extremely challenging to implement an effective poverty-targeting mechanism. In the absence of any reliable data about household income and annual poverty indicator surveys, the database for eligibility will need to be built from scratch. In addition, the allocation of available resources required to conduct a verification check on all bank accounts of registered families is highly questionable, especially taking into account the need to monitor this process by a third party.                                                                   

Riddled with loopholes and irregularities, funding for the RCP has not been secured yet, implying the possibility of delays in the implementation of the program in the future. At the time of writing this brief, the Lebanese parliament is aiming to shift funds from a World Bank loan that was initially set to improve the public transport sector^[35], noting that the public transport sector is currently in dire need of reforms after fuel prices have drastically increased and alternative forms of transportation are in demand. However, the World Bank regional director announced that the program will not be entirely funded by the financial institution and it will have to be accounted for in the 2022 Lebanese national budget^[36]. He demanded that Lebanon funds its own ration card for the first two months (approximately $80 million), and the World Bank could provide the rest of the funding thereafter^[37]. In addition, Prime Minister Najib Mikati suggested using the country’s allocation of “Special Drawing Rights” (SDR) from the International Monetary Fund to fund the first two months of RCP^[38]. However, the 2022 national budget does not mention the RCP in particular, and in the absence of any official announcements, it remains unknown how the RCP will be funded.

In addition to that, the amount of money offered by the RCP, with a base payment of 25$ and averaged at $93 per family^[40], is very limited and not enough to cover basic needs. It also remains unclear whether the disbursement currency will be in US Dollars or Lebanese Pounds and at what given exchange rate. In general, the amount offered by the cash transfer programs provides very limited relief to struggling families with already extremely low-levels of incomes, especially in the light of rapid inflation and the removal of subsidies. For example, medication prices have increased by 5 times, diesel prices surged by 2,050 percent in a year and household cooking gas by 1,454 percent since last November^[41]. The Central Administration of Statistics revealed that the consumer price index in the country for the month of September 2021 recorded an increase of 144.12 percent compared to a year earlier (September 2020), and the consumer price inflation during the first nine months of 2021 amounted to 116.1 percent^[42]. Moreover, a survey conducted by the World Food Program (WFP) in March-April 2021, showed that 43 percent of respondents were unemployed and 47 percent of households are unable to access food and other basic needs^[43].

RCP and Pork Barrel Politics

The RCP has faced several delays in its implementation, beginning with the postponement of the initial date of registration from September 2021 to December 2021 due to technical and political hurdles. It is important to underline that the reasons behind the continuous delays in the implementation of social assistance programs are also exceedingly political. Past experiences in Lebanon suggest that the RCP, being a poverty targeted program, would not be immune to the same clientelistic competition for resources and influence especially in light of the 2022 parliamentary elections.

Alternative Approaches and Recommendations

Towards an inclusive, universal, and lifecycle-based social security system

In a nutshell, short-term fixes and emergency-based responses such as poverty-targeted cash transfers should not be regarded as a substitute to a sustainable social protection system, especially when the country is facing financial and economic collapse^[44]. As the only concrete solution put forward by the government so far, and while 82 percent of the population is in need of support, the RCP does not have enough coverage, offers very little benefits to those who will receive cash transfers and focuses on households rather than the needs and rights of individuals.

Moving towards a new envisioned recovery that prioritises social justice and protection as a public good will require a universal and inclusive system that meets the needs of the whole population, especially when the state is not equipped to handle complex poverty targeting schemes and PMTs. According to data by IMPACT, 59 percent of registered individuals are unemployed^[45]. Therefore, it is important to reiterate the need for universal and lifecycle schemes, such as old-age pension and unemployment benefits, to support the population as a whole.

The existing limitations and challenges that stem from the social protection system in Lebanon are not new, and the implementation of structural reforms and amendments are indeed long overdue. Over the years, the approach to social policy in Lebanon has been reactive, residual, and led by international donors’ agendas^[46]. The reliance on social assistance programmes such as the NPTP and RCP only aimed to alleviate poverty of targeted vulnerable groups through providing direct cash. This approach has created divisions among classes, as the upper and middle classes were receiving services through a subsidized private sector^[47]. However, in light of the current crises, many people who benefited from private services, such as private insurance, can no longer afford it^[48] and instead are demanding alternative options.

For this reason, social safety nets such as the RCP and the existing NPTP should be embedded within a broader social security protection framework that targets the entire population. The government should develop this framework along with syndicates, workers’ groups, civil society actors, and other stakeholders. This will require necessary reforms of the National Social Security Fund^[49] to ensure universal coverage, retirement pensions and unemployment allowances^[50]. The Lebanese government should begin with setting national priorities and strategies for social development and rights based on people’s needs and not just in alignment with the donors’ agenda. Instead, they should encourage the donor community as well as local and international NGOs to align with these priorities, especially in the sectors of livelihoods, social services and protection. Given that broad-based inclusive transfers are a big investment, the government will need to have an effective approach in raising revenues, and in return, the transfers can contribute to broadening the tax base and strengthening trust. The Lebanese state must also establish a unified, national body for the implementation of social protection policies that include concerned ministries, public administrations, as well as civil society actors^[51].

The donor community should support the priorities set by the Lebanese government, and ensure that funds given to the state and relevant public institutions are not being squandered, but used appropriately towards rights-based structural policy reforms. The donor community should also ensure that policy reforms are informed by a participatory process, in which labor organizations and civic actors can directly communicate their concerns, needs and priorities. During the civil war and onwards, civil society organisations (CSO) have played a big role in providing social services and filling the gaps left by the state, and this particularly increased after the port blast and the economic crisis. However, it is important to note that CSOs should not replace the state’s role of service provision. Alongside these services, CSOs still need to advocate and lobby for social and economic rights to be provided by the state, mainly the access to universal social security^[52].

Although economic recovery will likely take a long time, it can be regarded as a window of opportunity to establish a framework that is inclusive, rights-based, sustainable, and provides necessary tools towards mitigating the burdens of the crises to ensure that all members of society receive equal protection and support. To establish lifecycle schemes, the government must address the structural flaws of the existing system and design a comprehensive recovery plan. This can entail financial reforms and the restructuring of public sectors to be able to finance a sustainable social protection system. For example, broadening the fiscal space for social protection can be done through increasing revenue from progressive taxation, including income tax reform and the introduction of wealth tax, as well as the reallocation of public expenditure within and outside the social protection sector. This can generate the needed resource base to finance a sustainable social protection framework on the long run^[53].

In addition, the reliance on services provided by sectarian organizations weakens the ties between citizens and the state and instead maintains the existent cycles of poverty^[54]. Instead, a universal and inclusive social security system will allow a shift from traditional patron-client networks towards a new social contract between the government and people. This can also be supported by mutual aid initiatives, community-based and grassroots organizing such as forming cooperatives^[55], encouraging participation in trade unions and their emancipation from traditional sectarian parties’ influence, and other forms of solidarities. These transitions will inevitably facilitate the implementation of an inclusive and universal social protection framework on the long run.