Refugees lose $250 million in aid because Lebanese banks used below market exchange rate

Exchange rates being used are in some cases 40 per cent lower than the market rate

The huge fall of the Lebanese pound against the dollar is not reflected in exchange rates banks are using. Getty Images

Refugees and vulnerable communities in Lebanon have lost tens of millions of dollars in UN humanitarian aid to local banks that are disbursing funds at unfavourable exchange rates, Reuters reported on Thursday.

Total losses are about $250 million since the worst economic and financial crisis to engulf the country in decades unfolded in 2019. The estimate, by Reuters, is based on a UN internal document.

The losses, which the UN described as staggering, are being fuelled by the steep plunge in the national currency, which has now lost more than 90 per cent of its market value against the dollar, trading at 15,000 to the dollar as opposed to the 1,515 official rate.

Banks disbursed UN humanitarian assistance to Syrian and Palestinian refugees and low income Lebanese at a rate 40 per cent lower than the market rate throughout 2020 and the first four months of 2021, a UN official told Reuters.

In March, representatives of the UN, European Union and World Bank urged the government to disburse aid in US dollars days after Lebanon’s parliament approved a $246 million World Bank loan for a social safety net.

Lebanese officials have so far resisted demands, with the government struggling to secure the necessary foreign currencies to maintain vital imports of fuel and medicine.

Donor countries, on the other hand, are reluctant to channel additional aid through government agencies plagued by years of corruption.

Rampant corruption throughout state institutions and the government's failure to enact reforms in exchange for international financial aid have plunged more than half the country's population into poverty.

The worsening crisis was further compounded by the huge explosion that struck Beirut port last August, killing more than 200 people and destroying thousands of properties in the capital.

Since then, the country has been without a fully functioning Cabinet as the political crisis deepens.

In 2020, UN agencies and donor countries provided more than $1.5 billion in humanitarian aid to support more than one million Syrian refugees and their host communities.