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BEIRUT: At least $ 250 million in United Nations humanitarian aid for refugees and poor communities in Lebanon was lost to banks selling local currency at severely unfavorable rates, Thomson Reuters Foundation investigation found .
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 at the end of 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 approximately 40,500 Lebanese pounds, from the World Food Program (WFP).
This has now grown to 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.
“Previously the purchasing power was very good, we could get an acceptable food basket,” said Abu Ahmad Saybaa, a Syrian refugee who runs a Facebook page that highlights the challenges refugees face in Lebanon.
“But now (the documents) cannot provide us with more than a gallon of cooking oil. There is a huge difference in purchasing power, ”said the father of five, who has lived in a refugee camp in rugged northeast Lebanon since 2014.
“It takes a toll on all of our health – mental and physical. “
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 it 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 come from a 2020 United Nations assistance program worth around $ 400 million that provides around 1 million Syrian refugees in Lebanon with monthly funds for food, education, transport and winter weather protection of shelters.
Lebanon is home to more than one million Syrian refugees, nine out of ten of whom 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, indicates that in July 2020, “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
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-Française (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, who 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.
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 pay 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 are more than ready to invest in helping people, but we need a credible counterpart that is not going to pocket 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, ”said Chaaban.
“Right now, every penny counts for Lebanon. “


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About Guillermo Russell

Guillermo Russell

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