World Bank, EU and UN say Lebanon 'verbally' agreed to disburse aid in dollars

As Lebanese pound crashes to new low, agreement is reached to hand out assistance in hard currency

Impoverished groups in Lebanon could soon receive more aid after a letter from international donors showed on Wednesday there was an agreement to hand out assistance in hard currency as the Lebanese pound crashed to a new low.

Aid to the country in the midst of a financial meltdown exacerbated by the Covid-19 pandemic was previously handed out in Lebanese pounds at rates set by the Central Bank.

But in a letter to the country’s finance ministry seen by the Thomson Reuters Foundation, representatives of the European Union, United Nations and World Bank said they “take note of the verbal agreement” on February 22 by the Central Bank chief and deputy prime minister for aid to be disbursed in US dollars.

“We are confident you share the urgency of rolling out the agreed-upon disbursement mechanisms at the earliest, in order to ensure the consistency and continuity of aid amidst increasingly challenging socio-economic conditions,” the letter said.

Outgoing Finance Minister Ghazi Wazni and a World Bank representative did not immediately respond to a request for comment. An EU spokesperson said the bloc would comment soon.

Lebanon's parliament last week approved a $246 million World Bank loan for a social safety net. According to the loan agreement, it would be handed out in Lebanese pounds.

A source well informed on the matter confirmed the letter to The National.

It urges the government to hand out hard currency to those most vulnerable, the source said, but there is no guarantee that authorities will heed their call.

"The letter does not mean that this is what's going to happen and it isn't a threat that funding will stop if it doesn't happen," the source said.

If the government agrees to the request by the UN, World Bank and EU, it would extend to the $246 million World Bank social safety net loan that was agreed upon by parliament last week.

Charities and international institutions with foreign funding currently use an official exchange rate set at 3,900 Lebanese pounds to the dollar by the Central bank, to hand out aid in the local currency.

While the Lebanese pound remains officially pegged at 1,500 to the dollar it tumbled to a rate of 15,000 to the dollar on Tuesday and has been depreciating in the past year and a half.

This effectively means that under the current system, beneficiaries of international aid only receive a fraction of its real value.

Parliament had agreed for the World Bank aid to be disbursed at a preferential rate of 6,250 Lebanese pounds to the dollar, which is almost half the market value of the pound.

"We cannot go back to business as usual and to funding at the rate of 3,900," the source said.