Lebanese banks swallow at least $250m in UN aid

Lebanese banks swallow at least $250m in UN aid
Palestinian children at Shatila refugee camp in Beirut.Over $250 million in U.N. humanitarian aid intended for refugees and poor communities has been lost to banks selling local currency at highly unfavourable rates. (Shutterstock)
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Updated 17 June 2021

Lebanese banks swallow at least $250m in UN aid

Lebanese banks swallow at least $250m in UN aid
  • Officials from donor countries confirmed that banks swallowed between a third and half of all direct U.N. cash aid in Lebanon
  • An internal assessment in February estimated that up to half the UN assistance programme's value was absorbed by Lebanese banks

BEIRUT: At least $250 million in UN humanitarian aid intended for refugees and poor communities in Lebanon has been lost to banks selling the local currency at highly unfavorable rates, a Thomson Reuters Foundation investigation has found.
The losses — described in an internal United Nations document as “staggering” and confirmed by multiple sources — come as Lebanon grapples with its worst ever economic crisis, with more than half the population living under the poverty line, according to the World Bank.
They stem from a plunge in the value of the Lebanese pound since the economy began to collapse in late 2019, sending prices soaring and forcing many Lebanese into poverty.
The unfavorable exchange rates offered by Lebanese banks have hit Syrian and Palestinian refugees and poor Lebanese particularly hard as they are able to buy far less with the cash handouts they receive from the UN
Pre-crisis, refugees and poor Lebanese received a monthly payout of $27, equal to about 40,500 Lebanese pounds, from the World Food Programme (WFP).
That has now risen to about 100,000 Lebanese pounds per person, but its real value is a fraction of what it was before — about $7 at the current rate.
“The buying power used to be 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 faced by refugees in Lebanon.
“But now (the handouts) can’t get us more than a gallon of cooking oil. There’s a huge difference in purchasing power,” said the father of five, who has lived in a refugee camp in Lebanon’s rugged northeast since 2014.
“It’s weighing 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 in Lebanon had been swallowed up by banks since the outset of the crisis in 2019. All spoke on condition of anonymity.
During 2020 and the first four months of 2021, banks exchanged dollars for UN agencies at rates on average 40 percent lower than the market rate, the aid official said.
Lebanon maintains an official exchange rate of about 1,500 pounds to the dollar, but since the crisis 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, resulting in soaring prices.
Most of the losses came from a 2020 UN assistance program worth about $400 million that provides around 1 million Syrian refugees in Lebanon with monthly funds for food, education, transport, and winter weather-proofing of shelters.
Lebanon is home to over 1 million Syrian refugees, nine in 10 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 the program’s value was absorbed by Lebanese banks used by the UN to convert donated US dollars.
The document, seen by the Thomson Reuters Foundation, said that by July 2020 a “staggering 50 percent” of contributions were being lost through currency conversion.
The Association of Banks in Lebanon (ABL), which represents the country’s commercial banks, denied using aid to raise capital.
It said the UN could have distributed 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 the rates provided to humanitarian organizations
The $400 million UN 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 comprises the WFP, the UN refugee agency (UNHCR) and the UN Children’s Fund (UNICEF).
The Thomson Reuters Foundation compared the rates at which the banks converted US dollars in 2020 and 2021 with the concurrent market exchange rates to calculate the amount of aid lost.
The losses amounted to about $200 million in 2019 and 2020 and at least $40 million so far in 2021.
The figures are in line with the UN internal assessment and were independently verified by an aid official.
A UNICEF spokesperson said the agency was “very concerned that recipients receive the full value of cash transfers” and had recently renegotiated to obtain a rate close to the market rate.
It is also testing disbursement in dollars for some programs, the spokesperson said.
Banque Libano-Francaise (BLF), which was contracted by LOUISE agencies to give out aid, declined to comment on the unfavorable conversion rates, saying it was bound by a confidentiality agreement with them.
It also said the agencies could have distributed the money directly in dollars.
WFP funding of monthly cash assistance to 105,000 vulnerable Lebanese people, worth some $23 million last year, used the same unfavorable exchange rates, a WFP spokesperson said, meaning up to half of funds were lost to banks.
The WFP and UNHCR referred the Thomson Reuters Foundation to the UN humanitarian coordinator’s office, which declined to comment on the reasons for the massive losses.
A spokesperson for the UN agency for Palestinian refugees (UNRWA) said between a third and half of the aid it distributed since October 2020 – up to $7 million — was lost through currency conversion. The agency has repeatedly warned of funding shortfalls.
The documented losses from the LOUISE, WFP and UNRWA programs amount to at least $250 million since October 2019.
Following pressure by the UN agencies, the discrepancies between the average market exchange rate and the rate offered by the banks have shrunk, but not disappeared.
Confronted with a financial system keen on sucking in as many dollars as possible, donors and UN agencies have struggled to develop a cohesive approach that maintains the full value of aid.
In May, a top World Bank official said Lebanon had agreed to disburse the aid from a $246 million World Bank loan to poor Lebanese directly in dollars, but the payouts have been delayed.
Dollarization of aid, which was recommended in the February internal assessment and lobbied for by donor countries and independent analysts, would keep the full value of the donations for beneficiaries regardless of fluctuations in currency rates.
But Lebanese authorities have resisted efforts to dollarize aid inflows as they seek to maintain control over one of the few remaining sources of hard currency.
Meanwhile, donor nations have grown increasingly impatient and fearful of reputational damage tied to the millions in taxpayer money absorbed by banks.
“We’ve been more than ready to invest in helping people, but we need a credible counterpart that’s not going to pocket money that we are ultimately accountable for at home,” said one Western diplomat on condition of anonymity.
Jad Chaaban, a professor of economics at the American University of Beirut, said international organizations operating in Lebanon often walked a tight line between making compromises in a difficult political environment and holding to standards of accountability.
“In this case, it’s unacceptable and there must be much higher standards. We effectively see the same dynamics as contractors or crony businessmen siphoning off money that they received to build a school or infrastructure project,” Chaaban said.
“Right now, every cent counts for Lebanon.”


Saudi Arabia tops emerging markets league table

Saudi Arabia tops emerging markets league table
Updated 27 July 2021

Saudi Arabia tops emerging markets league table

Saudi Arabia tops emerging markets league table
  • Analysis in MSCI put Kingdom at the top of the list with a near 27% rise in market value

DUBAI: Saudi Arabia has been the best performing of all the emerging markets since the onset of the pandemic, according to new data from global information provider Refinitiv.

An analysis of 25 countries in the MSCI Emerging Market Index put Saudi Arabia, home to the Tadawul stock exchange in Riyadh, at the top of the list with a near 27 percent rise in market value since the start of 2020, when COVID-19 began to impact the global economy.

That compares with an average increase of just 1.6 percent in the overall index, and easily outstrips the 14.2 percent jump in the MSCI World Index of all countries.

Turkey was the worst performing of the emerging markets, with a 22.8 percent fall since the pandemic began, followed by Peru and Colombia, with drops of more than 20 percent. Of the other Middle East countries, Egypt witnessed a 6.5 percent decline, while Qatar barely grew, with just a 1.2 percent increase. 

The UAE placed second in the post-pandemic emerging market ranking, with a 21.3 percent rise.

Market experts said one of the reasons for the Kingdom’s outperformance was the authorities’ effective response to the economic recession brought on by the pandemic.

“The Saudi authorities were relatively quick to react with a series of measures, especially relating to smaller businesses, to help ease the burden of the pandemic economic effects, and the market has reacted to that,” Tarek Fadlallah, chief executive of Nomura Asset Management in the Middle East, told Arab News. 

The International Monetary Fund recently applauded the Kingdom’s pandemic response, as well as reforms to its capital markets that have enhanced its position as the biggest equities trading hub in the Gulf.

Tadawul has introduced derivatives trading which has broadened its appeal, especially to foreign investors accustomed to more sophisticated trading techniques.

HIGHLIGHTS

• Market experts said one of the reasons for the Kingdom’s outperformance was the authorities’ effective response to the economic recession brought on by the pandemic.

• The International Monetary Fund recently applauded the Kingdom’s pandemic response, as well as reforms to its capital markets that have enhanced its position as the biggest equities.

• Saudi Arabia’s market outperformance reflects its sustained course of economic transformation, along with liquidity boosting by the central bank, says expert.

“Saudi Arabia’s market outperformance and strong corporate valuations reflect its sustained course of economic transformation, along with liquidity boosting by the central bank,” financial expert Nasser Saidi told Arab News. 

“Economic and structural reforms, along with social liberalization policies, including opening up foreign markets to foreign investors, allowing for 100 percent foreign ownership in certain sectors, resulted in massive investment inflows.”

He highlighted the effect of the “policy-shattering” initial public offering of Saudi Aramco, and the steady stream of market flotations continuing this year, as a key feature of the Kingdom’s progress since the pandemic began.

The Saudi performance rates highly even in the context of rising global markets, buoyed by low interest rates and big government stimulus. New York’s S&P index has gained 33 percent since the onset of the pandemic.


Startup of the Week: Tuma Taiba feeding vegan needs

Startup of the Week: Tuma Taiba feeding vegan needs
Updated 26 July 2021

Startup of the Week: Tuma Taiba feeding vegan needs

Startup of the Week: Tuma Taiba feeding vegan needs

JEDDAH: Veganism has become a growing trend in Saudi Arabia with ever more people opting for a plant-based diet.

For some it is for health reasons, while for others it is a moral decision. As a result, supermarket shelves in the Kingdom have over the past four years seen an increase in stocks of vegan products.

In 2019, Amani Nouri, who gained a diploma in nutrition, founded Tuma Taiba — Arabic for good bite — in Jeddah, to cater for the burgeoning vegan market in the country.

“I chose to name it Tuma Taiba because good food is the foundation for a good body,” she told Arab News.

Her company offers vegan cheese spreads made from different nuts, and they come in flavors such as olives, pomegranate, and bell pepper. It also produces vegan and gluten-free pastries made with dates, sourdough bread, and kombucha tea in flavors including a mix of berries or apple, pineapple, and cinnamon.

The startup sold more than 500 products last year and aims to triple that amount this year.

Nouri said 85 percent of her diet was now plant-based after she made the decision to change her eating regime due to suffering from a number of health conditions that cleared up when she switched to a healthier diet.

“I suffered migraines once or twice a week to the point I needed strong painkillers, and this of course could hurt my kidneys and body in general.

“After I turned to the plant-based diet, I lost weight, I even look more youthful, all the pains and conditions I suffered from are cured, the cysts went away without any medication, and the hormonal imbalances too,” she added.

Family and friends encouraged Nouri to pursue the vegan business after trying her recipes. “On the insistence of family and friends, I started sharing my dishes with people because of the community’s need for different vegan-friendly food.”

She noted that the number of people in the Kingdom opting for vegan food was steadily increasing.

And some of her customers were non-vegans. “They find a delicious plant-based alternative that satisfies their tastes, and benefits their bodies, and notice the difference after eating more plant-based foods,” she said.

Tuma Taiba is planning to expand its product range and open a restaurant in the next couple of years.

• Details are available on Instagram @tumataiba.


Low interest rates boosted mortgage demand by 27% through May

Low interest rates boosted mortgage demand by 27% through May
Updated 26 July 2021

Low interest rates boosted mortgage demand by 27% through May

Low interest rates boosted mortgage demand by 27% through May
  • Residential real estate financing contracts offered to individuals by local banks reached 133,006 through May, with a value of SR69.5 billion

RIYADH: Mortgage lending in Saudi Arabia increased 27 percent this year through May, as interest rates decreased to between 1 percent and 4.9 percent, compared to about 6 percent early last year.

Residential real estate financing contracts offered to individuals by local banks reached 133,006 through May, with a value of SR69.5 billion, according to data from the Saudi Central Bank (SAMA).

Real estate financing grew by 50 percent compared with the same period in 2020 when SR46.6 billion was lent via 104,000 contracts.

“There is great competition between banks and real estate finance companies to obtain a greater share of the housing demand, after government support and joint financing programs with the Real Estate Development Fund (REDF), which led to an increase in the volume of lending for home purchases,” Riyadh-based Menassat Reality Co. CEO Khaled Almobid told Arab news.

“I expect more lending during the last quarter of this year despite the difficulties it is facing due to the rise in some housing prices in major cities and the lack of supply,” he said.

Saudi banks are offering mortgages with interest rates as low as 1 percent at Al Rajhi Bank, 2.5 percent at the Saudi National Bank (AlAhli Bank) and up to 4.5 percent at some banks.

Residential villas made up about 80 percent of the total financing, apartments 17 percent, while the purchase of residential lands’ financing made up the remaining 3 percent.

Saudi real estate financing achieved a record growth during the past three years, amounting to about 295,590 contracts, worth SR140.7 billion in 2020, compared to 22,259 financing contracts, worth SR17 billion in 2016, local media reproted citing SAMA data.


Lebanon sells cheapest Big Mac in the world as currency collapses

Lebanon sells cheapest Big Mac in the world as currency collapses
Updated 26 July 2021

Lebanon sells cheapest Big Mac in the world as currency collapses

Lebanon sells cheapest Big Mac in the world as currency collapses
  • Lebanese pound is 70 percent undervalued according to the Big Mac Index
  • A split is emerging between those paid in Lebanese pounds and those in dollars

RIYADH: Lebanon is home to the world’s cheapest Big Mac after the pound slumped in value, leaving it more than 70 percent undervalued against the US dollar, according to the Economist Intelligence Unit.

At 29,904 Lebanese pounds, a Big Mac is not cheap for those being paid in local currency, but with an exchange rate of 17,800 to the dollar, it costs just $1.68 for tourists and those lucky enough to get paid in dollars.

The slump in the Lebanese pound is exacerbating and accelerating inflation on a basic basket of goods, such as rice, sugar and flour, on a daily basis, said Lebanese economic analyst Bassel Al-Khatib.

Most people are paid in the local currency in Lebanon, where the national minimum wage stands at 675,000 Lebanese pounds per month, which was once worth almost $450 at the official exchange rate, but today barely fetches $30 on the black market, according to the Crisis Observatory at the American University of Beirut (AUB).

The Observatory said the cost of food has soared by 700 percent over the past two years, and this increase had picked up pace to 50 percent in the past few weeks alone.

Most Lebanese people are getting poorer on a daily basis, pushing some of them to sell their gold, cars and even furniture to survive, while others wait for US dollar transfers from their relatives abroad, or wait for civil society aid, Al-Khatib told Arab News.

This is all reflected in Lebanese social media, which is flooded with donation requests for new-born baby milk and medications that are not available anymore in the markets or are sold for extremely high prices. There are also numerous donation requests for people in need of food.

At the same time, others are sharing their expensive restaurant bills, such as Babel Baher who spent 5 million Lebanese pounds on a meal and posted the cheque on Facebook.

“$250 is almost nothing for someone coming from abroad,” a Facebook user called Rania wrote under the post. “This is a very cheap bill for someone who has US dollars and this dinner is not expensive at all compared to abroad.”

Al Khatib said that those paid in US dollars are living an affordable life with only $300 out of their salaries while before they needed $3,000 to have the same quality of life.

“The patchwork policies to support some commodities is not helping as all commodities that are subsidized are smuggled, ” said Al Khatib.

The country’s mismanagement with no plan or economic vision to save Lebanon from its worsening crisis, led us here, and there are no positive prospects as long as there are no radical solutions in the country, he said.


PIF-backed Lucid Motors makes trading debut on Nasdaq

PIF-backed Lucid Motors makes trading debut on Nasdaq
Updated 26 July 2021

PIF-backed Lucid Motors makes trading debut on Nasdaq

PIF-backed Lucid Motors makes trading debut on Nasdaq
  • will make itsLucid to make trading debut on New York’s Nasdaq Global Select Market on Monday
  • Lucid merged with special purpose acquisition vehicle Churchill Capital Corp. IV

RIYADH: Lucid Motors, the Californian electric vehicle (EV) carmaker majority-owned by Saudi Arabia’s Public Investment Fund (PIF), will make its trading debut on New York’s Nasdaq Global Select Market on Monday.

Listed under the new ticker symbol “LCID”, the listing came about following the merger of Lucid and Churchill Capital Corp. IV — a special purpose acquisition company — on July 23. The EV firm will begin trading by ringing the Nasdaq opening bell on July 26.


The deal will help Lucid raise $4.4 billion, which will be used to fast track its production growth plans. The firm has over 11,000 paid reservations for its Lucid Air vehicle, which is on scheduled to start deliveries in the second half of this year.

“We are on track to meet our projected deliveries for the next two years, and we look forward to delighting our customers around the world with the best electric vehicles ever created,” Peter Rawlinson, CEO and CTO of Lucid Group, said in a press statement.

Michael S. Klein, chairman and CEO of Churchill Capital Corp. IV, said ahead of the merger: “Lucid has industry-leading technology, clear demand for its products, and is on track to deliver revenue-generating cars to customers in the second half of this year. We are excited to support Lucid’s transition into a public company and confident in its ability to address unmet needs in the automotive industry, which is moving toward electrification at a rapid pace and on a global scale.”

PIF announced its investment in Lucid Motors in Sept. 2018. The Lucid Motors CEO told Arab News in January that his team were scrutinizing possible locations in Saudi Arabia to open retail outlets — what Lucid calls “studios” — for their luxury EVs.

“We are already looking,” he said. “My retail team just returned from a scouting trip in the Kingdom, and that is very much on the road there. Hopefully, we can get a retail outlet there right at the tail end of 2021, probably early 2022.”

Earlier this month, the Wall Street Journal reported that Saudi Arabia stands to record a profit of nearly $20 billion on the back of its investment in Lucid.

PIF will own over 60 percent of the company, which is expected to have a market capitalization of about $36 billion.

Lucid’s expected market capitalization is nearly twice the valuation of Nissan Motor Co. and about two-thirds that of Ford Motor Co., which delivered more than 4 million cars last year. Lucid has yet to sell any cars.

Looking at the market for EVs, a report by the Pew Research Center found that 7 percent of respondents said they currently owned an electric or hybrid vehicle, and 39 percent said they were very or somewhat likely to buy an EV when they next came to purchase.

Interest has grown, with 1.8 million EVs registered in the US in 2020, more than three times as many as four years ago, according to the International Energy Agency.

While the US accounts for 17 percent of the world’s 10.2 million EVs, China is the biggest market, with 44 percent of all cars and Europe following with 31 percent.