Unfavorable dollar exchange rates mean refugees and poor Lebanese have received less aid, even as prices for basic necessities soared amid an economic crisis
* âStaggeringâ amounts of aid lost for the banks
* Refugees and poor Lebanese are the hardest hit
* Aid agencies fear potential damage to reputation
By Timour Azhari
BEIRUT, June 17 (Thomson Reuters Foundation) – At least $ 250 million in United Nations humanitarian aid for refugees and poor communities in Lebanon has been lost to banks selling local currency at very unfavorable rates, a revealed a Thomson Reuters Foundation investigation.
The losses – described in an internal United Nations document as “staggering” and confirmed by multiple sources – come as Lebanon grapples with the worst economic crisis in its history, with more than half of the population living under it. poverty line, according to the World Bank.
They stem from a fall in the value of the Lebanese pound since the economy began to collapse in late 2019, pushing up prices and plunging many Lebanese into poverty.
The unfavorable exchange rates offered by Lebanese banks have particularly hit Syrian and Palestinian refugees and poor Lebanese, as they are able to buy much less with the cash donations they receive from the UN.
Before the crisis, refugees and poor Lebanese received a monthly payment of $ 27, equivalent to about 40,500 Lebanese pounds, from the World Food Program (WFP).
It has now reached around 100,000 Lebanese pounds per person, but its real value is a fraction of what it used to be – around $ 7 at the current rate.
âBefore, the purchasing power was very good, we could have an acceptable food basket,â said Abu Ahmad Saybaa, a Syrian refugee who runs a Facebook page which highlights the challenges facing refugees in Lebanon.
âBut now (the documents) cannot provide us with more than a gallon of cooking oil. There is a huge difference in purchasing power,â said the father of five, who lives in a camp. refugees in rugged northeast Lebanon since 2014.
“It takes a toll on our entire health – mental and physical.”
ASSISTANCE TO REFUGEES
An aid official and two diplomats from donor countries confirmed that between a third and half of all direct UN cash aid to Lebanon had been swallowed up by banks since the crisis began in 2019 All spoke on condition of anonymity.
In 2020 and the first four months of 2021, banks exchanged dollars for UN agencies at rates on average 40% below the market rate, the aid official said.
Lebanon maintains an official exchange rate of around 1,500 pounds to the dollar, but since the crisis has only been able to apply that rate to a handful of essential goods.
All other imports have to be bought at much higher exchange rates, which causes prices to skyrocket.
Most of the losses are due to a 2020 United Nations assistance program worth around $ 400 million that provides approximately 1 million Syrian refugees in Lebanon with monthly funds for food, education, transport and winter weather protection of shelters.
Lebanon is home to over a million Syrian refugees, of which nine out of ten live in extreme poverty, according to UN data.
The country received at least $ 1.5 billion in humanitarian aid in 2020.
An internal UN assessment in February estimated that up to half of the program’s value was absorbed by Lebanese banks used by the UN to convert donated US dollars.
The document, viewed by the Thomson Reuters Foundation, said that as of July 2020, “a staggering 50%” of contributions were lost due to currency conversion.
The Association of Banks in Lebanon (ABL), which represents the country’s commercial banks, has denied using aid to raise capital.
He said the UN could have handed out in dollars, or negotiated a better rate with Lebanon’s central bank.
A central bank spokesperson did not respond to a request for comment on rates provided to aid organizations
LACK OF FINANCING
The $ 400 million United Nations program, known as LOUISE, receives funding from the United States, the European Commission, Germany, the United Kingdom, Canada, the Netherlands and France, among others, according to its website.
It includes WFP, the United Nations Refugee Agency (UNHCR) and the United Nations Children’s Fund (UNICEF).
The Thomson Reuters Foundation compared the rates at which banks converted US dollars in 2020 and 2021 with competing market exchange rates to calculate the amount of aid lost.
Losses amounted to around $ 200 million in 2019 and 2020 and at least $ 40 million so far in 2021.
The figures are in line with the UN’s internal assessment and have been independently verified by an aid official.
A spokesperson for UNICEF said the agency was “very concerned that beneficiaries receive the full value of cash transfers” and had recently renegotiated for a rate close to the market rate.
It is also testing dollar disbursements for some programs, the spokesperson said.
Banque Libano-FranÃ§aise (BLF), which was hired by LOUISE agencies to provide assistance, declined to comment on unfavorable conversion rates, saying it was bound by a confidentiality agreement with them.
He also said the agencies could have distributed the money directly in dollars.
WFP’s funding of monthly cash assistance to 105,000 vulnerable Lebanese, worth some $ 23 million last year, used the same unfavorable exchange rates, a WFP spokesperson said, which means that up to half of the funds have been lost to the banks.
WFP and UNHCR referred the Thomson Reuters Foundation to the office of the UN Humanitarian Coordinator, which declined to comment on the reasons for the mass casualties.
A spokesperson for the United Nations Palestinian Refugee Agency (UNRWA) said that between a third and half of the aid it has distributed since October 2020 – up to $ 7 million – has been lost due to currency conversion. The agency has repeatedly warned of the lack of funding.
Documented losses from the LOUISE, PAM and UNRWA programs amount to at least $ 250 million since October 2019.
Following pressure from UN agencies, the differences between the average market exchange rate and the rate offered by the banks narrowed, but did not disappear.
“EVERY HUNDRED COUNTS”
Faced with a financial system eager to suck in as many dollars as possible, donors and UN agencies have struggled to develop a cohesive approach that preserves the full value of aid.
In May, a senior World Bank official said Lebanon had agreed to give aid from a $ 246 million World Bank loan to poor Lebanese directly in dollars, but payments were delayed.
Dollarization of aid, which was recommended in the February internal assessment and called for by donor countries and independent analysts, would keep the full value of grants for recipients, regardless of exchange rate fluctuations. .
But Lebanese authorities have resisted efforts to dollarize aid flows as they seek to maintain control over one of the few remaining sources of hard currency.
Meanwhile, donor countries have grown increasingly impatient and fearful of the reputational damage associated with millions of taxpayer dollars being absorbed by banks.
“We have been more than ready to invest in helping people, but we need a credible counterpart that is not going to pocket the money for which we are ultimately responsible at home,” a Western diplomat said on condition of anonymity. .
Jad Chaaban, professor of economics at the American University of Beirut, said international organizations operating in Lebanon often walk a narrow line between making compromises in a difficult political environment and upholding standards of accountability.
“In this case, it is unacceptable and there must be much higher standards. We are effectively seeing the same dynamic as entrepreneurs or fellow businessmen siphoning off the money they received to build a school or an infrastructure project, âsaid Chaaban.
“Right now, every penny counts for Lebanon.”
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(Reporting by Timour Azhari @timourazhari Editing by Maya Gebeily and Claire Cozens. Please credit the Thomson Reuters Foundation, the charitable arm of Thomson Reuters, which covers the lives of people around the world who are struggling to live freely or fairly. Visit http: / /news.trust.org)
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