Lebanon is in need of a revamped social protection system for all its citizens at the different stages of their lives. Such a universal system must ensure access to social security, social assistance and care, and labor market programs. It should also underpin a strengthened social contract to replace the weak one in place prior to 2019, in which the state’s role was limited. Up until October of that year, when Lebanon’s finances collapsed in the wake of popular protests against the political leadership, the system of social protection catered to the lucky few—primarily public-sector employees—at high costs. Otherwise, it left most of the population unprotected, particularly the poor and most vulnerable. This unprotected population relied on support from their families outside of Lebanon or on services provided by nongovernmental organizations (NGOs), which tend to be confessionally based and supported by political leaders who often used social aid as an instrument of political patronage.
Since 2019, Lebanon has been experiencing a multidimensional financial and economic crisis that the World Bank has ranked “in the top ten, possibly top three” most severe economic crises globally since the mid-1800s. The economy is in its fifth year of contraction after a cumulative four-year contraction of 37.2 percent between 2018 and 2021, alongside a dramatic depreciation in the value of the Lebanese pound and triple-digit inflation, which has seen the purchasing power of the middle class and poorer populations plummet. As a result, poverty and vulnerability have increased significantly and public-sector employees have joined the ranks of the poor. Hundreds of thousands of youth and skilled workers have left the country—net migration reached 160,000 people in 2022—and the frail state has become even frailer, with few available resources and little institutional capacity to respond to the situation.
The need for an equitable and effective social protection system has therefore become ever more urgent. Despite the challenges, the ongoing crisis presents an opportunity to rethink Lebanon’s previous social protection model and put in place a universal system on which to build a new and stronger social contract between citizens and the state.
An Inequitable and Inadequate System of Social Protection
Social protection programs and policies are widely used globally to help individuals and societies manage risks and shocks, protect families from poverty and inequality, and boost access to economic opportunities. Social protection programs include social insurance, such as pensions, unemployment insurance, and health insurance; social assistance programs and safety nets, such as cash transfers and social care services; and labor and economic inclusion programs. Social protection is a key element of social contracts worldwide, including in the Middle East and North Africa.
Before 2019, the Lebanese government’s spending on social protection was high compared to the spending of other countries in the Arab region, at 6 percent of GDP compared to 4.6 percent on average in other Arab countries. In 2019, however, 93 percent of this spending went into pension schemes for formal workers in the public sector, mainly civil and military personnel, who constituted only 2 percent of the national population. Workers in the formal private sector, on the other hand, received an end-of-service indemnity payment upon retirement provided by the National Social Security Fund (NSSF), the amount of which was wholly inadequate for old-age protection. The government spent very little on the rest of the population—workers in the informal sector, unemployed people, and inactive people—and programs targeting the poor only covered 3–4 percent of the population. In other words, 5.5 percent of GDP was spent on 2 percent of the population, while only 0.6 percent of GDP was spent on social protection for 3–4 percent of the population and the rest of the population was left uncovered by government programs, indicating a highly regressive system with little effect on poverty.
A majority of social services in Lebanon are provided by nonstate actors, including political organizations and religious charities. This is due to reasons dating back to the Ottoman period and the years of the French Mandate (1920–1943), as well as to weak institutions and ineffective governments, especially during recent decades. Such social services include the provision of education (two-thirds of students attend private schooling), healthcare (68 percent of primary healthcare centers are owned by NGOs), and social assistance. For decades, this system of informal social protection has played the role of the state in catering to the poor, and one may argue it has proven to be more effective than the state, especially during episodes of the state’s near collapse, such as during the 1975–1990 civil war or after the financial and economic crisis of 2019.
However, this sectarian-based welfare has resulted in a highly fragmented and unregulated system, as well as the politicization of the process of accessing social benefits. In a national survey published in January 2011, Lebanese political activity was found to be strongly associated with the prospect of obtaining social assistance. This meant that citizens who were not politically affiliated were less likely to see their basic needs fulfilled if a political party did not consider them to be loyal partisans—which was probably more the case for low-income families, thereby reinforcing social inequities. There is much research pointing to the fact that the provision of social services by nonstate actors in countries with weak states undermines government legitimacy and erodes the social contract. Thus, this system of informal social protection strengthens clientelism and patronage that are endemic in Lebanon’s social structure.
Another major deficiency in Lebanon’s social protection system is the absence of a national and unified information system—often called a social registry—that contains up-to-date and verified information on household needs and welfare based on a unique identifier for every citizen. Such registries are used worldwide as gateways for citizens to apply for different social programs. Social registries are the backbone of information systems that allow individuals and families to apply to, register for, and determine their potential eligibility for one or more social programs. These registries allow citizens to seek direct support without the interference or involvement of third parties. They also reduce duplication, corruption, and abuse and are powerful platforms to coordinate social policy. In the absence of such registries, policy responses remain scattered, inefficient, and incapable of effectively identifying and reaching vulnerable households that require assistance. Prior to 2019, Lebanon did not have a social registry and relied on a limited and manual database for the National Poverty Targeting Program (NPTP), a small social safety net program implemented by the Ministry of Social Affairs that reached barely 10,000 households.
Lebanon’s financial and economic crisis meant that poverty, which was already high, increased sharply, exacerbating the social crisis. Between 2012 and 2019, overall poverty increased from 25.6 percent to 37 percent of the population, and extreme poverty increased from 10 percent to 16 percent. Estimates of poverty today indicate that extreme poverty—the percentage of those living on $1.00 a day—has doubled to 22 percent, while overall poverty has likely increased to 45 percent of the population. This translates to 1.29 million people living below the extreme poverty line.
To make things worse, the initial postcrisis government, led by prime minister Hassan Diab, adopted the wrong policies in 2020–2021. The first was to use declining foreign exchange reserves to subsidize the importation of fuel and other commodities. The subsidy regime fast depleted these reserves, as well as depositors’ money that had been blocked in Lebanon’s banks. During the nearly two years of Diab’s government, approximately $6–10 billion was spent on the fuel and commodity subsidy program. The fuel subsidy specifically was highly regressive, benefiting higher-income earners who generally tend to consume larger quantities of fuel. The subsidy regime also resulted in increased fuel smuggling into neighboring Syria as the price of fuel across the border was significantly higher.
Second, in late 2020, the Diab government hastily approved an approximately $100 million budget allocation for a social assistance program to distribute 400,000 Lebanese pounds in cash (roughly equivalent to $40 at the 2020 exchange rate) to some 400,000 households. The program was poorly designed and haphazardly implemented, with the assistance of the Lebanese army, which had no expertise in such programs. The army was asked to verify the eligibility of recipient families during a home visit, which involved checking family income—a task that was bound to be inaccurate and unfeasible. Cash payments were distributed door-to-door manually by military personnel. The absence of a registry and the necessary digital infrastructure in government means that it remains unknown how the funds were spent, if they reached the intended beneficiaries, or how households were selected.
In late 2020, the World Bank presented a plan that involved setting up a $264 million Emergency Crisis and Covid-19 Response Social Safety Net Project (ESSN) to provide targeted social assistance to those identified as living below the extreme poverty line. However, extensive delays in the program’s approval added to the severity of the social crisis. The main reason for the delay was the Diab government’s unwillingness to meet the World Bank’s conditions to establish a national social registry and engage an independent third-party agency to monitor and audit the use of the funds.
However, as the crisis deepened and the social situation continued to deteriorate in 2021, the new government of Prime Minister Najib Mikati that took office in October agreed to develop a social registry. On December 1, 2021, it began signing up beneficiaries. Within two months, close to 60 percent of the Lebanese population had registered on the DAEM (Arabic for “support”) registry created on the Inter-Ministerial and Municipal Platform for Assessment, Coordination, and Tracking (IMPACT) electronic platform. The DAEM registry is now the building block of a fully integrated social protection information system, allowing any citizen who is in need of assistance to register. This entitles them to be assessed and verified and subsequently receive social assistance directly from the state without intermediaries. Importantly, the DAEM questionnaire and database do not include information related to one’s religious identity, denying the government and politicians the means to manipulate the program for sectarian purposes.
The Path Toward an Inclusive Lebanese Social Protection System
Lebanon has taken the first steps toward building the necessary foundations for a universal social protection system. Today, more than 145,000 Lebanese households living in extreme poverty are receiving monthly cash assistance through direct electronic payments through the ESSN and NPTP programs. Yet much more needs to be done in this regard. By implementing a number of essential measures, the Lebanese authorities would be on course toward establishing the foundations of a new social contract for Lebanon.
First, the social protection system’s coverage needs to be expanded, prioritizing the poor and vulnerable before progressively reaching other segments of the population. Depending on financial resources, Lebanon should aim to widen social assistance coverage from the approximately 145,000 households covered today to at least all households living in extreme poverty, which is approximately 220,000 households. In addition, other vulnerable population groups need assistance, including people with disabilities and the elderly.
Second, and related to expanding coverage of the social protection system, public spending on social assistance, such as cash transfers and social care services, needs to be increased. The priority should be to target the neediest segments of the population before progressively expanding coverage. In line with global average levels of spending on social assistance, this figure should be equivalent to 1.5–2.0 percent of GDP—compared to Lebanon’s precrisis level of 0.11 percent. For such an increase to be feasible, the authorities need to create fiscal space in the budget by moving away from generalized subsidies and transfers, such as those to the loss-making national electricity company, Electricité du Liban, and toward targeted programs. They also need to implement tax reforms that broaden the tax base, close loopholes, and improve tax compliance among all taxpayers. This includes the introduction of direct, targeted, and progressive taxes and a review of exemption policies that primarily benefit well-off people and organizations.
Third, the state must put in place a national pension system that provides all workers with adequate coverage. The NSSF’s end-of-service indemnity scheme has to be converted into such a system through new legislation, which would cover workers in the private sector after their retirement and provide adequate protection in old age. At the same time, the current public-sector pension scheme needs to be reformed to ensure that it is financially sustainable. The private-sector and the public-sector pension systems should be progressively integrated into one national system for all workers, regardless of employment status. Finally, governance of the pension system must be reformed so as to eliminate clientelism and corrupt practices, starting with an overhaul of the NSSF board of directors and management, the introduction of annual audits of NSSF finances, and the automation of pension system procedures.
Fourth, policymakers should build on the DAEM registry to deliver not only social assistance programs but also other social protection schemes. The first step in this regard would be for all government social assistance programs (such as the NPTP, ESSN, grants to vulnerable groups, and so on) to use the DAEM registry. A second step would be for the databases of the ministries of health and education to be linked to DAEM so as to allow identification of the beneficiaries of different programs, as well as cross-checking to avoid duplication of assistance. Going further, the databases of the NSSF and ministries of finance and labor can be connected to DAEM. In this way, Lebanon would reduce the duplication and costs of its social programs by having a fully integrated digital ecosystem with a national social registry, digital IDs, and payment systems at its core. The registry should adhere to international standards of data privacy, data security, and good governance. This should include addressing how data is handled and by whom. It should also guarantee that data is stored safely and that an external auditing system is in place to oversee the implementation of proper security standards, among other measures. These are essential steps for protecting the system from political interference.
And fifth, Lebanon needs to invest in producing essential data for evidence-based policymaking, in particular data that provides representative information on living standards, inequality, and poverty among the population. Such data, which is normally gathered through large nationally representative household surveys, is critical for designing, monitoring, and measuring the impact of social protection programs. Lebanon is classified among the most “data-poor” countries in the world as it does not conduct periodic surveys to measure poverty; the last official national poverty survey was carried out in 2011.
Conclusion
Lebanon sorely needs an inclusive social protection system that has wide coverage and is equitable, efficient, transparent, and financially sustainable. By adopting the measures proposed above, the country can begin enhancing the welfare of its population and ensure a sound recovery from its current crisis. Improvements in social welfare through social protection programs can contribute to state-building outcomes. That is because such services act as a direct line of contact and accountability between governments and the governed, helping to rebuild the broken relationship between the state and citizens—something that is desperately required in Lebanon today.
When asked, Lebanese people have indicated that they want a stronger social contract with the state. A large majority of citizens believe the primary responsibility to help the poor rests with the government, which should provide the poor with social safety nets. Citizens also prioritize the state’s provision of services over other functions, such as guaranteeing political participation and security. Building a strong state and strengthening the ties between state and society can be at the heart of a new social contract characterized by a stronger role for the state in providing and financing social protection.
At the same time, the role of nonstate actors in social provision can be preserved but has to be better regulated. In addition, coordination between the state and nonstate actors in providing social services needs to take place through tools, such as social registries, to link their respective databases. By putting in place an inclusive social protection system, Lebanese people—especially the poor and vulnerable—can begin regaining trust in the state.
