Lara Baltaji, Hadi Knaiber, Batoul Ramadan, Abdallah Yahfoufi, Nour Azakir, Herbert Pritzki, Shadi Youssef
Background about the Lebanese Crisis:
For nearly three years now, Lebanon has been facing the most devastating financial crisis in the modern era. The crisis started in October 2019 and aggravated by the economic effects of the COVID-19 pandemic and by the massive Port explosion on August 4, 2020. As a result, the black market dollar exchange of the Lebanese Lira increased from 1515 L.L. (before the crisis) to around 40,000 L.L(today) marking an almost 2500% increase.
You can find below a visual that shows the change of the official LBP/Dollar exchange rate over time until this November 2022.
This huge increase came with countless economic impacts on inflation, unemployment and poverty. Lebanon’s severe crisis which was blamed on the government’s corruption and failure has led to massive impacts on the Lebanese currency causing extreme poverty, unemployment, medicine shortage, electricity shortage, fuel shortage, malnutrition and much more. You can find below a visual that shows the change of the Food Inflation and the Food Consumer Price Index with the LBP/Dollar Exchange Rate over time until this March 2022.
The huge inflation was directly reflected on the prices of basic food commodities in Lebanon ever since the start of the economic crisis in 2019. What is meant by basic food commodities is the minimum raw agricultural or animal products sufficient to satisfy the nutrition needs of an average household which comprise of:
Cereals and Tubers (rice, wheat, corn, starch)
Meat, Fish, Eggs and Seafood
Dairy (milk, cheese, labne)
Oil and Fats
Vegetables and Fruits
Sugar and Salt
The slope of increase before 2021, however, was quite subtle due to the fact that food commodities were subsidised by the government back then. As the Central Bank started to run out of resources to keep the subsidies, the government lifted them in March 2021. That is when the increase in prices of basic food commodities started to follow a much steeper slope. The below interactive visual shows the change in average prices of food commodities in Lebanon over the years.
According to the World Bank, food price fluctuations between Lebanese markets are caused by the Lebanese government’s “deliberately inadequate policy responses”. Due to the inadequate policy responses by the Lebanese government and due to the fact that Lebanon follows a free market economy, the problem of increased food prices started to worsen as not only are prices increasing, but now they are further inconsistent between markets in the different Lebanese regions . This adds an additional overwhelming problem to the many hardships Lebanese people are facing today.
In order to provide evidence for this issue, we decided to visit two supermarkets in Beirut and observe the differences in food prices. The variation in prices of the same food products was absolutely surprising. The below figure shows the price receipts of the two supermarkets.
Our next step was to explore two datasets issued by World Bank and World Food Programme Price Database. Our data explorations go hand in hand with our observed hypothesis which reveals that “there exist extreme and unexplained variations in food prices around markets in different Lebanese regions”.
The variation in prices of different food commodities has been an existing situation for many years now in Lebanon. This situation has exacerbated ever since the beginning of the economic crisis in 2019 as the price control responses have become inadequate. The following dashboard shows a comparison of prices of the different food categories between the different Lebanese districts over the years until 2021
The following bar graph shows a comparison of prices of specific food products between the different Lebanese districts over the years until 2022
Below we present the percentage difference of some food products between different Lebanese districts in 2022 (until October):
The average price of a one kilogram bag of wheat flour in Mount Lebanon was 28,000 LBP whereas in Baabak-El Hermel 10,000 LBP, recording a 95% difference.
The average price of a 160 gram Akkawi cheese in the South was 60,000 LBP whereas in Akkar 40,000 LBP, recording a 40% difference for cheese.
The average price of a can of powdered milk (2.5 kg) in Mount Lebanon was 325,000 LBP whereas in Akkar 210,000 LBP, recording a 40% difference for milk.
The average price of a 3.6 Litre gallon of olive oil in the South was 500,000 LBP whereas in El Nabatieh 430,000 LBP, recording a 15% difference for oil.
And the list of unexplained price variations between districts just keeps growing and growing.
Finally, in order to further prove our hypothesis, we conducted interviews with random Lebanese residents walking on Beirut’s seaside. When asked whether they were noticing price variations between supermarkets, most interviewees agreed that there exist obvious price variations of basic food commodities between different supermarkets. They added that this variation is not related to the location of the markets, for in many cases they have noticed that even markets lying walking steps away from one another vary in food prices. This means that the price variations cannot be explained by the products’ cost of transportation. It is only explained by the fact that there exists no governmental supervision.
In Lebanon, there are laws that protect consumers from monopoly and from overpricing. However, as with many other laws, the government is unable to strongly implement these laws and monitor the prices of the supermarkets especially in the areas that are far from Beirut. For that, we propose a website, which can later be developed into a mobile application. The website shows the official prices of basic food products in the Lebanese market which are regularly updated by the Ministry of Economy whenever a significant change in the LBP exchange rate occurs. It also displays the prices of these same products in different Lebanese supermarkets. This way, Lebanese consumers will be able to check the prices of products before they go shopping, and thus can tell which supermarkets are following the official prices specified by the ministry and which supermarkets are overpriced.
We are working on involving Lebanese consumers in our website. As we all know, the Ministry of Economy has a limited number of employees. Thus they will not be able to monitor the prices in all the Lebanese shops. A better way for monitoring prices in different supermarkets would be to include consumers in the process by giving them the chance to report prices directly on our website. This means that consumers will act as data collectors, and thus can contribute to the success of this project. Now, the ministry will be able to track the overpriced supermarkets and take the necessary measures.
We also hope to develop the website idea into a mobile application, which is a proposition heavily backed by the Ministry of Economy.
The application concept we came up with to tackle the problem needed to be validated in order to be put into action. We needed means to check if our ideology could in fact lead to a change in the real world or it is only a theory on a piece of paper.
Therefore, we decided to take the view points of two parties:
The Lebanese citizens which are the potential future users of our application in order to check if they are actually willing to use it and if it could lead to a change in their lives and to the country in general
The General Director of the Lebanese Ministry of Economy and Trade, Dr. Mohamad Abou Haidar to assess the practicality and the feasibility of the concept by a professional in the field.
In the streets of Beirut, we went down asking random people about the issue and the proposed solution. All in all, people supported the idea and many claimed that they would be using the application without any doubt and believed that it would make a positive change in the pricing system in Lebanon.
On 25 November 2022, our team visited the director general of the Lebanese Ministry of Economy and Trade, Dr. Mohamad Abou Haidar. We interviewed Dr. Abou Haidar about how practical it is to do such an application and how much it could lead to change and the interview was recorded. Dr. Abou Haidar claimed that this application would lead to a significant change in several aspects. First, this application will help fight corruption in terms of pricings because it will be directly synced to the ministry, so any abnormal pricings will be directly reported to the ministry and the issue will be transferred to the responsible authorities that are able to take any legal action. The ministry also is trying to work on implementing online services that protect consumers’ rights along with the UNDP and other organizations. So, this application will be aligned with the goal of the ministry, since it is online-based. In addition to that, it will play a role in controlling the pricings in the market since it substitutes the need for the huge number of employees and the human resources needed that, no matter how many, cannot roam around the entire supermarkets and stores in all the Lebanese regions. He also said that the complaints of the people will reach the ministry in a more efficient and effective way, because they are via the application and therefore, the ministry can know about the concerns and the issues in a much faster way. Finally, Dr. Mohamad summarized the idea by being a “win-win situation” for both the ministry and the consumers. This is because it will fulfil the needs of the consumers by knowing the exact pricings of the items in any supermarket with a press of a button, will ensure that the rights of the consumers are protected, and will lead to the right selection of the place to be visited. It will also help the ministry in terms of protecting consumers’ rights, censorship and supervision.
The concept website was presented to the General Director of the Lebanese Ministry of Economy and again, the solution was validated and approved by the ministry by providing us the full support in order to create this website as soon as possible in order to help the people followed by the country in general.
Ending with a future perspective, we believe that this problem is crucial to be solved in the very near future because of the damage it is causing in several aspects ranging from economic, financial to social. We, the people and the ministry have bets that our application concept could be a positive game changer in this issue. Solving this problem marks one of the battles against corruption, and is an attempt to make this country perfect, again.
Contributors: Amin Ghobar, Basilio Diaz, Daniel Raidan, Sally Harb, Stephany Said, and Wissam Malaeb.
Wheat Supply and Food Insecurity in Lebanon
A principal element to boost food security in developing countries is matching the demand for wheat as it is one of the world’s most crucial staple crops. Lebanon, with almost 46% of its households being food insecure, imports around 80% of its food needs and is highly dependent on soft wheat to make Arabic flatbread.
Due to the crippling economic crisis in Lebanon, the diminishing foreign reserves to subsidize wheat imports, the Beirut Port Blast that led to the destruction of the grain silos, and the Russian invasion of Ukraine that had an effect on the supply chain and the wheat prices, Lebanon has been struggling with a negative wheat supply shock.
Lebanon’s Current Situation and the Effects on Wheat Resources and Supplies
The country is facing one of the most devastating economic crises globally since the mid-19th century. The Lebanese currency’s more than 90% value loss against the US Dollar, the inflation rate that exceeded 200%, and the grain reserves lost after the destruction of the Beirut Port – that stored around 85% of the country’s cereals with a maximum capacity of 120,000 metric tons of grain – contributed to the problem at hand. Additionally, Russia and Ukraine supply Lebanon with 70% – 80% of its wheat demand. After the invasion, wheat prices increased drastically and Lebanon, a bankrupt country, was unable to fight in the bidding war.
Moreover, the smuggling of subsidized flour and wheat to the Syrian market and the need to fulfill the nutritious needs of the 1.3 million Syrian refugees on the Lebanese grounds made the food security response an immediate priority.
In terms of Lebanon’s agricultural nature, the country relies on the import of wheat because available land that is viable for farming is not enough to meet the country’s demands and make Lebanon self-sufficient. The consumption demand in Lebanon is topped at 450,000 metric tons, and local wheat production only produces around 10-15% of such demand.
Lebanon needs to start implementing short-term and long-term fixes as the citizens are grappling to afford the increasing prices of bread in a country with a limited number of reserves.
Therefore, we came up with solutions that are divided into two levels of fixes
Pursue avenues to continue subsidizing the price of bread. An example of that would be the “Lebanon Wheat Emergency Response Project” where a $150 million loan from the World Bank was taken that will be used in funding the imports for approximately six to nine months.
Support farmers and develop irrigation programs to help increase local production of the wheat market up until it makes up 50% of Lebanon’s total supply. However, Lebanon can only have a 10% to 15% increase every year according to a study done by the Ministry of Agriculture. This means that it could take 5 to 6 years to reach the goal stated above.
In addition to that, rebuilding Lebanon’s national grain reserve by reconstructing the Beirut port silos and building two new storage silos nearby is another solution. This would cost $100 million and would create six months’ worth of reserves at any given time. Many countries have shown interest in helping Lebanon build those.
Finally, turning to the Ministry of Agriculture’s large and rent-free warehouses in Beqaa should be considered, as the government has been relying on private mills for storage which keeps storage levels on a day-to-day basis and paves the way for black markets. These warehouses only need some maintenance and would be ready for use.
Team: Ibrahim Al Jaifi, Zahraa Jassar, Rami Haidar, Ali Hachem, Rim Zeaiter, Fatima Ayoub
“ We don’t go to school; we work in the daytime to support our families and spend the rest of our day playing in the streets.”
Said Omar and Yazan, two inspiring kids in Burj Al Barajneh, a refugee camp in the suburbs of Beirut. Under 10 years old, both already carrying the responsibility of working to provide for their families instead of being enrolled in education.
According to ILO, it is estimated that 160million children are involved in child labor, 79 million of which are in Hazardous Work that is likely to harm children’s health, safety or morals. All these children, including young Omar and Yazan, are at an age when they are supposed to be provided for, educated and protected. Having to spend most of their time working in jobs that are unsafe and exhausting, their chances of leading healthy and thriving lives diminish with each dollar they earn.
Child Labor in Lebanon
The emergence of the Lebanese economic crisis in 2019 brought with it an increase in percentage of families with children engaged in child labor from 29% to 38% between 2019 and 2021 according to IRC.
GDP, as an indicator of the economic performance of a country, noticed a 65% decrease from $52B to $18B during the period of 2019 to 2021. With this drastic drop in GDP, the unemployment rate rose from 11% to 15% while the CPI more than doubled, leaving thousands of families under the poverty line with no sources of income.
With these dramatic and sudden changes in the economic situation, 3 out of 5 children in Lebanon dropped-out of school and most of the rest switched to public education. Education has become less of a priority for both the government and families.
From a social perspective, 44% of parents who have taken part in a study by the World Vision Organization believed that involving their children in paid labor enhances their life skills and assures a source of income for their households. Meanwhile, the responsible government agencies have no clear and applicable laws in place to prohibit children’s exploitation or ensure they are enrolled in education.
Child labor has destructive impacts on the health of the child, exposing millions of children to physical, mental and emotional abuse. As a result, their mental and intellectual development face significant disruptions. Considering the increasing crime rates in the country and the exposure of children to illegal work activities, the forecasted 30% increase in crime rate in 2025 would involve criminal acts by juveniles.
Mr. Aws Al Kadasi, senior research analyst at Merci Corps, commented on the topic during an interview for this project:
“According to the UNICEF, one in 5 children in the least developed countries are engaged in child labor. A problem that was aggravated by COVID-19 and global economic decline that it takes a walk in Beirut to believe these numbers. Children require different systems of protection that starts with parents and extends to every office, business, institution, organization and agency, local and international, governmental or otherwise. Everyone, who is not a child, is responsible”
Both 8 and 16 Sustainable Development Goals highlights the need for international efforts to tackle the issue of child labor:
Target 8.7: Take immediate and effective measures to eradicate forced labor, end modern slavery and human trafficking and secure the prohibition and elimination of the worst forms of child labor, including recruitment and use of child soldiers, and by 2025 end child labor in all its forms.
Target 16.2: End abuse, exploitation, trafficking and all forms of violence against and torture of children.
Inspired by these goals as well as social responsibility towards the community, our project team designed an initiative to capitalize on the work of international aid organizations and local organizations and projects working to fight child labor and illiteracy.
Future4Kids (F4K) initiative aims to establish a cooperative relationship between NGOs that provides cash assistance to families and campaigns against child labor. F4K initiative will work on partnering with cash aid organizations and NGOs working in child education. Receiving cash assistance would be conditionally linked to the enrollment of beneficiaries’ children in education with families being required to show evidence of child enrollment in education periodically.
The initiative platform will allow these two parties to join efforts to encourage families to enroll their children in education. F4K platform will also allow for receiving public donations for child education campaigns carried out by our partners.
Where there is energy there is life, but what if that same energy is the reason life is being destroyed? Non-renewable energy resources such as coal, oil, and natural gas have been abused extensively over the years; and not only are they detrimental to the environment, but they are bound to finish in the future. The switch over to more sustainable sources of energy has been something that has not been around for a hundred years yet, for that it could still be considered to be still in its infancy today.
Sustainable Development Goal 7 is one of 17 Sustainable Development Goals established by the United Nations General Assembly in 2015. It aims to “Ensure access to affordable, reliable, sustainable and modern energy for all.” According to “SDG7 Energy Compact of the Republic of Lebanon”, by the year 2030, universal access to affordable, reliable and modern energy services should be ensured, as well as increasing substantially the share of renewable energy in the global energy mix, and expand infrastructure and upgrade technology for supplying modern and sustainable energy services for all.
Energy in Lebanon, ever since the mid-nineties has been dominated by oil, which represents more than 95% of the primary energy consumed in 2019 (Julian & Salameh, 2022). According to Electricité du Liban (EDL), in 1995 thermal energy expenditure was 4,349 GWh only to spike drastically to 14,617 GWh in 2017. In 2019, though, there is a noticeable decline in thermal energy expenditure as it settles at 11,665 GWh; with an increase in hydraulic energy from 415 GWh in 2017 to 829 GWh, thus almost doubling in two years. As a result, we notice that slowly, but steadily, Lebanon has been shifting its focus to renewable energy sources, thus aligning with SDG 7.
Source: World Bank Global Electrification Database from “Tracking SDG 7: The Energy Progress Report” led jointly by the custodian agencies: the International Energy Agency (IEA), the International Renewable Energy Agency ( IRENA ), the United Nations Statistics Division ( UNSD ), the World Bank and the World Health Organization (WHO).
Energy consumption in Lebanon has always been at a loss. From 1995 until 2019, Lebanon’s consumption averaged at 10,845 GWh whereas only 8,936 GWh has been averaged in production. Hence, this is where the deficiency lies. It is impossible to claim sustainability where there is an undersupply.
Despite the lack in production, Lebanon does in fact import sources of energy in order to fulfill the needs of the country in terms of electricity. That, though, does not reflect the reality of most Lebanese citizens. “For decades now, electricity has been a major issue in Lebanon. State-owned Electricité du Liban provides only two hours of electricity per day. However, some areas experience complete shut-off. Until today, the Lebanese people’s main alternative to state-provided electricity is resorting to private generators that work on diesel. Two problems emerge from this situation, the first one being the price of petroleum-related products” (Muro, 2021). Surprisingly, according to the most recent World Bank studies, in the year 2020, 100% of Lebanese have access to electricity. The reality of the situation is very different as aforementioned with privatized energy distribution becoming the norm, consequently aggravating the environmental situation.
Source:Electricité du Liban (E.D.L)
As the economic crisis intensifies day by day and energy costs rise by the hour, the more well-off portion of the Lebanese society has been resorting to alternative energy sources; mainly solar energy. Although that does not solve the problem per-se, it has spurred a mass transition as NGOs have hopped on board to provide solar panels to less-abled communities. As a result, more and more people have been stopping their memberships with alternative providers (generators).
It comes as no surprise, switching to solar energy. It is a step that is long overdue, and as the saying goes “necessity is the mother of invention”. Even though it is not exactly an invention, but through necessity, Lebanon is slowly becoming more sustainable! Lebanon has a lot of natural resources such as wind and water. However, the most interesting and important natural asset is the abundant sunshine, making solar energy in Lebanon the ideal alternative to consider for Lebanon to get out of the electricity crisis. Using solar energy in Lebanon saves money for the Lebanese people whose private generators’ cost keeps on increasing. In fact, for 12 hours of electricity a day, the fuel cost for private generators can be as high as $550 per day. Although the installation of solar panels is expensive as well, it is an investment. If someone pays $550 per day on fuel, installing solar panels will reduce their cost to around $140 per day. (Monzer, 2022)
Yet another possible solution, straying from the tradition of utilizing natural resources, is the use of yet another crisis Lebanon suffers from. The trash situation has been plaguing the country for years now and it is possible, with the right funding from the right individuals and associations to begin collecting this trash and transferring it to specialized factories that will in turn use it in order to produce energy. This long term investment thus solves two issues simultaneously, while providing job opportunities for many locals.
It is of the utmost importance in Lebanon to deviate away from oil as a main fuel for energy and depend more on renewable energy from resources such as sun, wind and water. In Lebanon up to 4.5% of electricity comes from hydropower and up to 95.5% from oil. Abiding by the goals set in the SDG 7 is a surefire way to take the appropriate steps to building a society in which sustainable energy is the norm. Despite being a long way from sustainable; with the aid of the diaspora, concerned NGOs, and the local community, it is possible to make use of nature’s bounties, which are plentiful in the 10,452 km2 of mountainous rushing streams, gusting winds of the vast planes, and the showering sunlight reaching every corner of the nation.
Wassim, Nathalie, and Imad; three individuals who were pushed out of work by the deteriorating economic conditions in Lebanon. Tens of thousands of people like them have been suffering daily for the past 3 years living from paycheck to paycheck up until they were forced out of it (work). Lebanon has witnessed what no other country has. Unemployment rates doubled in only a decade, COVID-19 took out thousands, and inflation bankrupted hundreds of businesses.
According to Okun, a very low or negative growth in GDP leads to a rise in unemployment. By observing this visual, we can see how unemployment skyrocketed while GDP growth took a deep dive. Comparing the years 2008 and 2009, GDP growth increased 10.23 percentage points while unemployment rates decreased by 6.35 percentage points. We can conclude an inverse correlation between GDP growth and unemployment. Another observation is that between years 2020 and 2021, GDP growth increased by almost 15 percentage points. Despite this growth, unemployment remains significantly high at 14.49 percentage points. Importantly, this project is action-oriented in that it shows the nexus between unemployment and GDP growth #SDG8, which are intrinsic to an economy, from more “policy-driven” factors that can be addressed, improved or mitigated.
Here, a question rises? What is the cause for the disproportionality between GDP growth and unemployment rates? There are 3 possible causes for its inverse relation:
• The decrease of Foreign Direct Investment (FDI) which reached 3.98 percentage points in 2019 due to the lack of security and political tension
• Another possible cause is the low diversification in economic sectors due to scarcity of resources. Looking at this visual, we can see the focus of employment shift mainly to the service industry which witnessed an increase by 65.10 percentage points while the agricultural and industrial sectors are left behind increasing by under 30 percentage points in 2019.
• The third and final possible cause is the over-dependence on food and fuel imports. Lebanon possesses the second highest food and energy imports in 2019.
What should be done?
Drawing upon decades of empirical literature on drivers and predictors of lack of growth, this project proves Okun’s law using visualizations for the case of Lebanon. According to International Labor Organization (ILO), not just growth, but quality of growth is the key anchor in the SDGs 2030 agenda. Sustainable economic growth will require societies to create the conditions that allow people to have quality jobs that stimulate the economy while not harming the environment.
1. Creating greater opportunities for women and men to secure decent employment and income. Closing the employment gap is at the heart of the decent work agenda, this can be through promoting voluntary private initiatives and corporate social responsibility.
2. Instating policies to enhance knowledge, skills and employability for men and women since gender remains a source of labor market inequalities and inadequately utilized human resources. Women continue to be employed in a narrower range of occupations than men and to be concentrated in lower-paid, insecure, and unprotected jobs.
3. Promoting employment through reconstruction and employment-intensive investment.
4. Increasing access to financial services to manage incomes, accumulate assets and make productive investments.
Findings and Recommendations
A shift in economic thinking and planning towards economic structural transformation is necessary for the Arab region to develop on SDG 8 (ESCWA, 2021). The post-pandemic SDG agenda must leverage the lessons learnt to reinforce national social safety nets and employment policies. This strengthens economic resilience and allows developing countries to absorb shocks. A continued lack of decent job opportunities, insufficient investments, and under-consumption slows down economic growth. The average growth rate GDP is increasing after the pandemic; however, it still did not reach pre-pandemic levels of growth and developing countries such as Lebanon are moving farther from the 7% growth rate set for 2030. Therefore, as labor productivity decreases driven by low productivity and unemployment rate rises, standards of living decreases and overall economic growth decreases.
Governments must join forces and formulate policies to promote better job opportunities through active labor market programs, corresponding to important SDGs: Economic Growth and Decent Work, as well as Partnerships to Achieve the Goals.
Sustainable economic growth will require societies to create the conditions that allow people to have quality jobs that stimulate the economy while not harming the environment. Job opportunities and decent working conditions are also required for the whole working age population. There needs to be increased access to financial services to manage incomes, accumulate assets and make productive investments. Increased commitments to trade, banking and agriculture infrastructure will also help increase productivity and reduce unemployment levels in the world’s most vulnerable regions.#SDG8 #SDG16
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