BEIRUT, LEBANON, 4 FEBRUARY - A technical letter analyzing the financial governance framework of the World Bank Lebanon Emergency Crisis and Covid-19 Response Social Safety Net Project (ESSN) has been published on the six-month mark of the Beirut Explosion. Written by Lynn Zovighian, Co-founder and Managing Director of The Zovighian Partnership, the letter inaugurates a new page on the ZP website dedicated to studying humanitarian aid in Lebanon and the Middle East.

The letter presents a critical review of the financial governance model defined in the Loan Agreement signed by the World Bank Group represented by Mr. Sanoj Kumar Jha, Regional Director for MENA and Lebanon Minister of Finance Ghazi Wazni, dated January 29, 2021. Zovighian sheds light on pending unanswered questions raised given the design of the humanitarian loan and the potential consequences that would be borne by Lebanese citizens.

On January 12, 2021, the World Bank Group Board of Directors approved the loan facility and released the design and implementation plan for the US$ 246 million loan dedicated to Lebanon’s most vulnerable citizens. 

In an opinion piece published in An-Nahar Newspaper on January 15, 2021, Zovighian evaluated the implementation plan of the humanitarian aid and its repercussions on the Lebanese, highlighting the existing gaps of the loan due to the lack of data on poverty and impoverishment metrics in Lebanon.

“Unfortunately, we know that a data deficit is a well-known culprit for poorly designed humanitarian assistance programs,” she wrote.
 
In Zovighian’s opinion, insufficient data points are being used to design and justify the poverty alleviation aid mechanism, although there is no evidence-based research to measure how much is financially required to ensure impoverished households cover for food, medicines, utilities, clothing, house expenses, rent, and other important cost items. 

Since the World Bank Group board approval, Lebanon journalists and analysts have raised concerns about the loan being disbursed to extremely impoverished households at a below market rate of 3,900 LBP x 1.6, leaving room for a potential currency arbitrage in the books of the Banque du Liban. Public discourse has also criticized the fact that the humanitarian loan will need to be paid back in hard currency (US dollars), questioning the feasibility of such a payback scheme as the currency crisis continues to unfold in the country with no strategy to create effective government revenue streams.

Zovighian tackles some of these concerns, raising additional questions in her technical letter. At what exchange rate will the Banque du Liban account for this humanitarian aid in its books? At what rate will it print Lebanese Pounds or buy from the market? How will the fees and hidden costs affect Lebanon’s dire economy? Will impoverished household members with pre-paid electronic cards holding a monthly value of 100,000 LBP be required to pay commissions on their card payment transactions? 

“I hope this will inform the collective national conversation that is calling for the review and possible re-design of Lebanon’s latest new loan and aid mechanism,” she writes in her introductory remarks.

The publication of this breakdown of the governance design and unbundling of related risks is the latest contribution to the growing data repository The Zovighian Partnership has published on humanitarian aid. All data and analysis are available on an open source basis on The Zovighian Partnership Public Office website: https://zovpart.com/humanitarian-aid.