The ills of Lebanon’s social protection system are not a result of financial or technical constraints.¹ They are rather political. For decades, ruling elites have consciously eroded the social role of the state to prey on the population’s vulnerabilities as they arise. The most flagrant example is their several attempts to capture the Emergency Social Safety Net (ESSN), a program intended to rapidly aid an increasing number of vulnerable households during the crisis. Politicians tried to change the currency of aid disbursement to Lebanese lira, which would have exposed households to inflationary shocks and deposited foreign currency at Banque du Liban (BdL). Additionally, they sought to reduce the budget allocated for oversight and constrain the capacity for a social safety net delivery system, which would have significantly undermined the efficiency of the program. Moreover, they worked to influence the design of the beneficiary identification database to hold discretion over the selection of aid beneficiaries.

While the World Bank was effective in countering these attempts, the ESSN program was stalled for two years by Lebanese politicians. This delay, inaccurately attributed to “administrative blunders”, ² forced vulnerable households into sacrifices in nutrition and health, while the share of Lebanese living in poverty increased from 55% in May 2020 to 74% in September 2021.³ Instead of addressing this grave reality, ruling elites doubled down and effectively branded the ESSN a substitute for subsidies by excluding its beneficiaries from the ration card—the subsidy compensation program that has yet to launch due to alleged lack of funding. In doing so, political elites attenuated the poverty alleviation objective of the ESSN and the subsidy compensation objective of the ration card. 

What is the ESSN program?
The ESSN is a social safety net program financed via a $246 million World Bank loan and includes cash transfers to the extreme poor, education top-ups, social services, and systems-building components.⁴  It is largely an expansion of the existing National Poverty Targeting Program (NPTP), Lebanon’s main poverty-targeting scheme which, since 2011, has provided cash, food vouchers, and social services to Lebanese households living in extreme poverty.⁵  The ESSN was designed to provide 147,000 extreme-poor households with cash benefits, protect the human capital of 87,000 children at risk of dropping out of school, strengthen the capacity of Lebanon’s Social Development Centers, and build a National Social Registry—an integrated database that would identify individuals eligible for social assistance.  

How was the ESSN delayed?
After being proposed by the World Bank to the government in early 2020, the ESSN’s cash-transfer component only began in March 2022. Several factors contributed to this delay, including lockdowns induced by the Covid-19 pandemic, the Beirut Port blast, and the resignation of the Hassan Diab cabinet. However, pervasive elite-level interference in the design of the ESSN was the most significant factor in stalling its rollout. In fact, the ESSN proposal was reviewed by two governments and parliamentary committees, in addition to being voted on twice in the general assembly between its inception in January 2020 and ratification in December 2021. 

During this period, political elites resorted to three attempts to re-engineer the ESSN away from its intended objectives.

1. Funneling aid liquidity into safe hands 
Considering the scarcity of foreign currency in Lebanon’s financial sector in 2020, political elites saw the ESSN as an opportunity to make up for this deficit. To do so, the government pushed for ESSN cash disbursement in LBP—under the pretext of aligning the ESSN with “existing humanitarian programs in the country”⁶ —thereby depositing the hard currency at BdL. Had the World Bank honored this request, the Lebanese political class would have undermined the value of assistance and retained control over the incoming hard currency. 

The proposed change in currency disbursement would have substantially reduced the real value of assistance households receive, thus undermining their access to optimal benefits and the intended objectives of the ESSN. Delivering cash assistance to households in LBP, albeit at a preferential exchange rate, ⁷ would have exposed them to inflationary shocks. ⁸

Moreover, depositing fresh USD into BdL would allow its governor and his political protégés to hold discretion over how funds are spent. If the past three years are any guide, the funds would have been exhausted either on a regressive subsidy structure for one additional month, or on a currency market intervention to artificially stabilize the Lebanese lira (LBP).⁹  In fact, these two operations are in large part responsible for depleting almost $20 billion from BdL’s foreign reserves since August 2019.

2. Undermining accountability and project operation
Constitutionally, the country’s executive branch is responsible for negotiating with foreign entities as international agreements are drafted. When international agreements require financing, as in the case of the ESSN, they are sent to parliament for ratification.¹⁰  However, in March 2021, when the ESSN draft law reached the general assembly for a vote, parliament deviated from what should have been a simple ratification routine.¹¹  During the session, ruling political parties passed a version of the ESSN law that included structural changes to the project design not previously approved by the World Bank. These focused on reallocating the ESSN’s financial resources under the pretext of financing cash transfers to 14,257 additional households.¹²  While rejected by the World Bank, the changes would have created a $21.386 million budget surplus, on paper, by:

i) Reducing the role of the independent Third-Party Monitoring Agent (TPMA)
ii) Reducing the amount allocated for a safety net delivery system
iii) Reducing the amount allocated for operational and oversight functions

Had these amendments been passed, the ESSN’s implementation would have been significantly undermined. First, reducing the scope of work of the TPMA, which is tasked with confirming the successful delivery of aid, constrains capacity to review households’ claims concerning possible delays or withholding of cash transfers. Second, creating a social safety net delivery system is one of the main components of the ESSN, as it aims to build a National Social Registry that can be used to swiftly assess households’ eligibility for different social assistance programs. The attempt to amend this component contradicts the ESSN’s vital objectives and reflects political elites’ rejection of such a unified database, over which they would have limited influence. Third, reducing administrative and oversight budget lines in an arbitrary manner poses a risk at the fiduciary management level, threatening the overall efficiency of the ESSN. ¹³

3. Retaining discretion over aid beneficiaries
As Lebanon lacked a unified database for social assistance, ruling elites had the beneficiary list of any program within their reach of influence. This means that elites were well positioned during the design of ESSN’s stakeholder identification database to try to retain some discretion over the selection of beneficiaries. 

The disagreement between the World Bank team and Lebanese politicians over the design of the household database was arguably the most prolonged and significant. The cabinet sought to use the list of households managed by the Lebanese Army, which was partly used for the National Social Solidarity Program (NSSP)—the temporary cash-assistance program launched during Covid-19 lockdowns. ¹⁴ This list, however, was mired by inaccuracies, as it included duplicate names and applications from deceased persons and civil servants,¹⁵  suggesting clientelist practices. The World Bank, on the other hand, proposed beginning with the NPTP database, which already included 43,000 eligible households, followed by a phased intake of other applicants registered on IMPACT—Lebanon’s e-governance platform managed by Central Inspection. This would have allowed the Lebanese state to launch the program while, in parallel, analyzing applications of other households and laying the foundation for IMPACT to host a National Social Registry. 

Following strong endorsements by the World Bank, the Lebanese government assented to creating a new database using IMPACT in September 2021,¹⁶  after BdL lifted the exchange-rate subsidy and the ration card was being stalled by politicians under the pretext of tight fiscal space.¹⁷  In the ration card law, which passed in July 2021,parliament indicated that households would apply for the aid via “a platform” that had yet to be defined.¹⁸  This, in effect, established a precedent that allowed for IMPACT to be used as part of the ESSN program.  As a result, IMPACT launched its Daem platform so that households can apply for both the ESSN and ration card programs.

What is the status of the ESSN?
Two years after its inception, the ESSN is finally reaching vulnerable households. Applications are evaluated in an automated manner through IMPACT and verified via field visits by the World Food Program (WFP), while households are receiving the optimal level of support, as the cash assistance is distributed in USD.  By the end of January 2022, almost 583,000 households had applied for the ESSN and the WFP began its household verification visits.¹⁹  In mid-March 2022, cash disbursements began, which should cover eligible households for the remainder of 2022, with the months of January and February reimbursed retroactively. ²⁰ As of mid-November 2022, more than 160,000 household verification visits had been conducted, of which 75,625 households received assistance.  ²¹

Avoid the risk: The paramountcy of a new social protection system
Without reforming the governance, coverage, and financing of social protection systems, any isolated assistance program carries a risk of falling prey to elite-level interference. Such interference would serve to set political loyalty as a precondition for the provision of social benefits, further distorting Lebanon’s social contract.²²  Fixing this and avoiding the political economy risk is possible. The antidote lies no further than the National Social Protection Strategy,²³  which the Lebanese cabinet made little progress on since vaguely committing to endorse it in May 2022.²⁴  Among its prescriptions, the strategy advances integrated social assistance systems, comprising a social protection floor that provides lifecycle income support and social safety nets that cover anyone below the poverty line. Accordingly, the reforms listed in the national social protection strategy should be high on Lebanon’s political agenda and set as conditions for unlocking foreign support.