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The REPUBLIC of LEBANON The Impact of the Syrian Crisis and the Critical Need for Sizeable Additional Financing. second working group meeting on mena new financing initiative January 25, 2016 Amman, Jordan Alain Bifani Director General Ministry of finance lebanoN. Main Facts.
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The REPUBLIC of LEBANONThe Impact of the Syrian Crisis and the Critical Need for Sizeable Additional Financing second working group meeting on mena new financing initiative January 25, 2016 Amman, Jordan Alain Bifani Director General Ministry of finance lebanoN
Main Facts • Lebanon is facing an unique situation: It is hosting the largest number of displaced per capita by far in the world. • The crisis is not of Lebanon’s making…Yet we have shouldered an enormous economic, fiscal, social, and security cost. • By accommodating such large numbers of displaced, Lebanon is providing the world a highly valuable public good. • Lebanon should not be expected - nor is it able to - finance this global public good. Therefore, first and foremost: Lebanon needs sizeable grants. • With the support of the international community, Lebanon and the displaced population have benefited from grants in the last three years. • However, each humanitarian appeal has been underfunded by 50-60%. • Grants have not been available in an adequate manner, and in spite of the very high debt pressure on Lebanon, we need to secure critical developmental needs for Lebanon’s stability and to the benefit of the displaced and host communities. • Given the persistent lack of sizeable aid, we have to consider Concessional Financing as a compliment to grantsfor the developmental needs, while grant money remains critical to compensate for the growing debt. • We also note that a very small proportion of the grants have gone to/through government with the exception of the World Bank supported Lebanon Syria Crisis Trust Fund (LSCTF) and support to the RACE program (education).
Lebanon is a big global benefactor, with the highest displaced per capita country in the world!
Social and Economic Impact of the Syrian displaced Crisis • GDP growth estimated to be nil by the Lebanon Central Bank, far below the average of 9 percent growth experienced during the four years prior to 2011. (World Bank – Central Bank – IMF) • Economic loss of $5.6 billion in 2015 only due to the displaced crisis, representing 11.3% of GDP. The cumulative overall economic loss from 2011 till 2015 is around $15 billion. • Doubling of the unemployment rate (>20%). One-third of Lebanese youth are unemployed, a 50 percent rise since 2011, in a labor force estimated to be 50 percent larger than pre-crisis (IMF). Increase in informality and downward pressure on wages. • More than 190,000 Lebanese pushed into poverty; current 1m poor pushed deeper into poverty. Since 2011, overall poverty in Lebanon has increased from 28% to 34%
Fiscal Impact of the Syrian displaced Crisis • Lebanon’s debt to GDP has risen for the first time in 8 years to 138% in 2015 representing an extra yearly debt service burden of $600 million. • Bank deposits increased by only 3.72% until the end of November 2015 according to the Central Bank of Lebanon, compared to 12% in 2010. • The fiscal deficit grew to more than 8% of GDP, with additional cumulative expenditure directly related to the Syrian displaced crisis amounting to 0.94 $ billion • The total lost revenues related to the Syrian crisis since 2011 is $2.4 billion, of which $1 billion were lost in 2015 alone. • The fiscal revenue decreased in 2015 by 10% for the first time since the end of Lebanon’s civil war in 1990 bringing revenue to GDP to 19.3%
Vulnerability of Lebanese and displaced and Pressures on Services and Environment • Crisis has negatively affected key growth drivers, such as construction, tourism and the service sector • Decrease of exports due to deterioration of Lebanon’s only land export route which crosses Syria • Despite huge efforts by GoL / partners, 59% (over 220,000) Syrian children between 6 and 14 remain out of school • 41 percent of the displaced population is projected to live in substandard shelter conditions • US$20 million of due bills for the hospitalization of displaced Syrians are uncovered • The number of additional electricity users has officially reached 1.17 million, and the cumulative cost related to Syrian displaced have reached $434 million in 2015 only. • Incremental degradation of the environment due to the presence of displaced population (increase of 20% in air emissions, 8-12% in water demand, 12-14% in wastewater generation, 33% in urban densification). The yearly cost on the environment is estimated at $3.7 billion. • Lebanon had to recruit 15 thousand persons in the armed forces during the past two years, which is a 20% increase in the numbers and an extra direct yearly burden of $147 million.
Continuum between Humanitarian Assistance, Stabilization, and Development Needs and Instruments • While humanitarian needs continue to exist and need to be addressed through humanitarian funding channels, additional financing needs to be leveraged to strengthen the capacities of Lebanon and its communities hosting displaced to absorb the shocks on their economic and social fabric. • Concessional Financing Facility to complement existing humanitarian and stabilization financing to address medium-term development needs in Lebanon in sectors impacted by the Syrian conflict and the large presence of displaced. Humanitarian assistance and protection Strengthening national institutions and service delivery Macro-economic, infrastructure, social and environment Humanitarian instruments Development aid/grants Concessional financing
Consistently Large Gaps in Humanitarian/Stabilization Financing • Lebanon Crisis Response Plan 2015: • $2.4 billion funding needed • Only $1.4 billion reportedly received • Stabilization Roadmap (2013): • More than $1bn estimated needs at that time • Only $75 ml received through the Lebanon Syria Crisis Trust Fund • More than 90% of the funding has been outside the budget - to UN/NGOs
2016 Humanitarian and Stabilization Needs $2.48 billion will be presented at the London Conference LCRP 2016 : $2.48 billion funding required (35% for stabilization and 65% for humanitarian programs)
Budget Support needs by sector (2016-2020) in $ million The total budget support needed is equal to $2.01bn required, for instance, in the form of a yearly Eurobond interest rate subsidy of $402 million.
Priority Development NeedsInvestment and Budget Support (2016-2020)
Expected Impact if Needs are Not Met • Increased risks of economic and social insecurity • Increased tensions between communities and increased risks of service provision systems’ collapse • Increased risks of diseases, malnutrition and morbidity • Increased risks on individuals - especially youth - diverging their potentials and capacities into undesirable negative coping mechanisms • Increased risk of illegal migration of displaced Syrians and hosts
