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08.12.22

Intentions are not enough: Lebanon must adopt the National Social Protection Strategy

Wassim Maktabi,
Sami Zoughaib,
Rania Eghnatious

During its eight-month stint, the Najib Mikati cabinet failed to endorse the National Social Protection Strategy (NSPS), although the prime minister had issued statements intending to do so.1 In fact, following its final drafting in January 2022, the NSPS only reached the cabinet’s agenda during its last session,2 where ministers committed to the strategy’s principles but pledged to redraft it within six months—a pledge whose realization remains uncertain given the government’s likely extended period in a caretaker role.

Why does Lebanon need a social protection strategy?
As political factions continue to delay economic reforms and stabilization, Lebanon’s population has been plunged into multidimensional vulnerabilities, with most households facing income insecurity, labor informality, student drop-outs, and healthcare inaccessibility.3 The result is a hemorrhage of human capital and an increase in dependency on informal social assistance networks, many of which can take on a sectarian dimension.4 Given the notorious structural weaknesses in Lebanon’s social protection system, particularly its coverage gaps and eligibility bias that have been acutely exposed during the Covid-19 pandemic,5 its reform should sit at the top of the political agenda. However, the past three years have witnessed a near abandonment of social policy, as the state’s response to the crisis was led by the central bank’s monetary interventions.6 Instead, politicians’ attention to social protection was limited to two social safety net programs that were voided from their intended socioeconomic recovery framework:7 the Emergency Social Safety Net (ESSN), which only materialized in March 2022,8 and the Broad-Coverage Cash-Transfer (BC-CT), which remains unimplemented as it lacks financing.  

To this end, it is of paramount importance to precede or bind the government’s economic recovery plan with the NSPS to pave the way for an inclusive rights-based social protection system that can subscribe citizens back to the state and preclude confessional-based welfare systems.9 In light of the recent parliamentary elections and the modest breakthrough of the nascent opposition, policymaking must be expedited to adopt the NSPS and legislate its reform prescriptions. Otherwise, and with time not on Lebanon’s side, people’s increasing vulnerabilities will continue to be held as collateral to policymakers’ inability to concede to economic reforms, thus risking an increase in social tensions and dependency on sectarian elites.

What is the National Social Protection Strategy?
In 2018, the Lebanese government commissioned UNICEF and the International Labour Organization (ILO) to provide technical assistance on the preparation of a national social protection strategy, in coordination with the Ministry of Social Affairs. Through an extensive process of consultations that started in mid-2019, a draft strategy document was developed and submitted to the Inter-Ministerial Committee on Social Policy in 2021. The strategy is the first to propose a human rights-based approach to social protection in Lebanon—a structural change to the country’s fragmented and privilege-based system.10 As a “vehicle for a new social contract between the state and citizens”, the NSPS pledges a resilient social protection system characterized by rights-based universal coverage, shock responsiveness, and financial sustainability. In order to achieve these goals, the strategy adopts a hybrid framework consisting of two integrated approaches to social protection: the lifecycle approach, which deals with the vulnerabilities of individuals that emerge across life stages, and the pillar approach, which offers the five implementing instruments of social protection, namely social assistance, social insurance, social welfare, financial access to services, as well as economic inclusion and labor activation.11

By adopting both approaches in a complementary manner, the NSPS proposes reforming each of the pillars to progressively expand the coverage of social protection across lifecycle stages—childhood, working age, and old age—to reach universal coverage.

What reforms does the proposed strategy include?
1. Progressively introduce a package of non-contributory social grants as part of a social protection floor that provides basic guarantees to all people across their lifecycle

Poverty and insecurity are often linked to specific stages in individuals’ lifecycles, where challenges and risks render them vulnerable to drastic falls in living standards. Such lifecycle stages and risks include childhood, disability, old age, and unemployment.

In Lebanon, the financial crisis has had drastic implications on virtually all households, and exposed an array of acute lifecycle vulnerabilities. While the temporary expansion of the National Poverty Targeting Program through the ESSN program can help provide a safety net of last resort for those in extreme poverty, it remains wholly insufficient to achieve a rights-based system of universal social protection as the NSPS calls for.

The establishment of a Social Protection Floor requires the introduction of core social grants, starting with a Disability Allowance and a Social Pension. While such programs can initially be rolled out through international support, financing such non-contributory social assistance schemes should be part of the government’s responsibility towards citizens in the medium- and long-term, and is domestically attainable through progressive taxation.

2. Ensure financial sustainability of the National Social Security Fund, while improving the adequacy and comprehensiveness of social insurance benefits 

The End-of-Service Indemnity (EoSI) scheme at the National Social Security Fund (NSSF) suffers from structural deficiencies: It provides inadequate lump sums at retirement which are eroded by inflation and the depreciating national currency; it relies heavily on settlement payments by employers, many of whom fear declaring full pensionable salaries; the accumulated savings in the EoSI branch have been chronically used to cover the deficits in the NSSF’s other schemes, namely its healthcare coverage. As a result, the NSSF is currently in dire financial straits.12

The transition from the EoSI to a mandatory pension system at the NSSF would constitute a viable solution to the inadequate provisions of the EoSI scheme. By passing the latest draft law on pension reform in parliament, Lebanon’s social protection system can transition to a more stable, adequate, and fair system that ensures income security in old age to a large portion of the Lebanese population. Instead of lump-sum indemnities, such a system would offer regular payments indexed to inflation to all contributors who retire, and would ensure a minimum guaranteed pension value to those with intermittent or insufficient contributory history.

Similarly, the NSSF’s family allowance benefits, already inadequate prior to the crisis, have now lost most of their value. Reforming the NSSF thus requires adjusting benefit levels to the cost of living, with higher benefits to dependents with disabilities, as well as expanding its coverages to all contingencies, including unemployment. While such reforms should be accompanied by sound actuarial studies that provide recommendations on contribution and benefit levels, a clear first step would be adjusting contributory ceilings to allow for improved solidarity-based financing and progressive contributions from workers with higher income. 

3. Reform and expand social health protection to all, through a combination of social insurance and tax-financed schemes

This reform aims to build a unified social health protection (SHP) system by reducing fragmentation and providing adequate coverage to the entire population. In the short term, Lebanon should urgently restore the health protection mechanisms under the NSSF and other social insurance schemes by adjusting the tariff structures to inflation and ensuring necessary revenues. For the NSSF, this would entail forcing employers to declare the full salaries of their employees and increasing the ceilings on contributions. These measures should be accompanied by an emergency plan to subsidize comprehensive health services to uninsured groups.

On the long term, Lebanon should move towards progressively unifying risk pooling and purchasing functions within a streamlined institutional framework and harmonize design and financing of healthcare schemes. The strategy proposes two policy directions: redirecting public funds to a revamped NSSF as a sole health insurer or establishing a National Health Fund that manages all public and contribution-based schemes.

4. Reform the governance and administration of the social security system, including the NSSF

Enhancing social protection benefits can only be possible within a reformed governance and institutional framework. Long-awaited reforms to the NSSF board of directors should be implemented, such as reducing its size; streamlining decision-making; enhancing information sharing; and ensuring tripartite representatives cover the expertise required to govern a social security institution. Organizational reforms should also be undertaken to enhance the NSSF’s institutional capacity and maximize the use of digital technologies.

Finally, Lebanon urgently needs to strengthen institutional coordination between the different stakeholders, including the NSSF, the Ministry of Labor, and the Ministry of Finance, to enhance compliance with the social security law. On the long term, efficiency gains and system integration could be achieved through transferring the contribution collection function to the state tax authority. 

5. Expand and diversify the basis for social protection spending in the country 

Given the current disintegrating socioeconomic conditions, increasing investments in effective and adequate social protection programs is no longer optional—it is a necessity to mitigate the impacts of the crisis and ensure a more rapid economic recovery. While they may appear limited, Lebanon still has options to broaden fiscal space for social protection.

In the short term, the following can be done: Reallocate public expenditures from within and outside the social protection sector to reduce inefficiencies; increase contributory ceilings; enhance tax collection; and channel resources from Official Development Assistance (ODA).

In the medium term, increasing revenue from progressive taxation, such as the income tax reform and a wealth tax, can generate the necessary resource base to provide access to basic health services and finance core lifecycle grants. In addition, unifying benefits and risk pooling mechanisms in the social insurance system and enhancing the affordability and attractiveness of the schemes can generate sustainable resources in subscribers’ contributions.

6. Transition towards an integrated and comprehensive Social Protection system

Amidst the current fragmented nature of the social protection system and its disconnected governance structure, the draft strategy proposes institutional reforms that would ensure a more coherent and integrated system, from policymaking to service delivery. Establishing inter-ministerial and multi-stakeholder coordination structures to ensure policy coherence and system integration, including a social assistance coordination unit, is one major initiative on this front. Other key initiatives should also aim to develop the infrastructure needed for service delivery, including government-owned registration and payment systems; and lastly, developing government-owned management information systems for the different programs and ensuring their integration as part of a single unified registry for the social protection sector.

Finally, the strategy incorporates other key reforms related to financial access to education, social welfare, as well as economic inclusion and labor activation. The latter involves promoting employment to vulnerable and disadvantaged groups through inclusive labor activation programs and enhancing the regulatory framework to protect labor rights and ensure decent work.

Avoiding past tendencies
The NSPS offers a glimmer of hope for Lebanon amidst turbulent times. In a sharp break with the country’s fragmented and privilege-based social protection system, the strategy paves the way for an inclusive and rights-based one. But as with many other promising government plans and reform pledges that have come and gone throughout the years, serious political will remains absent. Lest the strategy suffers the same fate, a strong reporting mechanism that allows citizens and the donor community to track the progress of the NSPS’ reform prescriptions is necessary to expedite its implementation. With an unprecedented financial crisis forcing the Lebanese people to consider socioeconomic and political alternatives, the NSPS must stand on top of the political agenda.

 

The authors would like to thank Karim Merhej for his input and for editing this article


[1] اليوم السابع. شباط 2022. "رئيس الحكومة اللبنانية يبحث اعتماد استراتيجية الحماية الاجتماعية بلبنان."

[2] الأمين العام لرئاسة مجلس الوزراء. أيار 2022. جدول أعمال مجلس الوزراء رقم 33-2022 التي ستعقد يوم الجمعة في تاريخ 20 أيار 2022.

[3] ESCWA. September 2021. “Multidimensional poverty in Lebanon (2019-2021) Painful reality and uncertain prospects.”

[4] Harb, M., et al. 2021. “Mapping Covid-19 Governance in Lebanon: Territories of Sectarianism and Solidarity.” Beirut Urban Lab.

[5] Maktabi, W., S. Zoughaib, and C. Abi-Ghanem. 2022. “Lebanon’s “Missing Middle”: Online Delivery Workers Under Precarious Conditions.” The Policy Initiative.

[6] Maktabi, W., S. Zoughaib, and S. Atallah. July 2022. “Impoverish and Conquer: How has the Lebanese state responded to the financial crisis?” The Policy Initiative.

[7] Maktabi, W. and S. Zoughaib. 2022. “Lebanon’s Emergency Social Safety Net: A journey through sabotage.” The Policy Initiative. (forthcoming)

[8] World Bank. March 2022. “Lebanon Announces Payment of Cash Transfers to Extreme Poor Lebanese households under AMAN.” Press Release.

[9] Cammett, M. 2014. “Compassionate Communalism: Welfare and Sectarianism in Lebanon.” Cornell University Press.

[10] Abdo, N. 2019. “Social protection in Lebanon: From a System of Privileges to a System of Rights.” Arab NGO Network for Development.

[11] UNICEF and ILO. November 2020. “Social Protection in Lebanon: Bridging the immediate response with long-term priorities.” International Labour Organization.

[12] Merhej, K. and K. Chehayeb. March 2022. “The Full Story Behind the Looming Collapse of the National Social Security Fund.” The Public Source.

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