Lebanon's dependency on remittances: What are the long-term effects?

Since the age of the Phoenicians, migration has been a central part of Lebanese identity. Today, the Lebanese diaspora continues to increase, numbering 14 million people and far outweighing Lebanon’s four million residents.

Lebanon’s 2019 financial collapse, exacerbated by the Covid-19 pandemic and the 2020 Beirut port blast, has led to a deepening economic crisis in the country.

Lebanese banks have disabled citizens’ access to their USD accounts due to rising inflation and currency devaluation. Those who can retrieve money find their funds to be a small fraction of their original value. In 2022, the country’s debt reached $101.1 billion.

A 2021 report by Information International, a local consultancy company, showed that emigration rates jumped by 346% that year – from 17,721 in 2020 to 79,134.

"The government is non-existent and unable to provide social assistance. So Lebanon relies on international aid or remittances"

In a country where 3.28 million people have been plunged into poverty since 2019, remittances from the diaspora are pivotal for the survival of those who stayed - but not all have access to them.

In Lebanon, they constitute 54% of the country’s GDP, or approximately $7.15 billion a year. But remittances have often exacerbated vulnerability and political dependency, keeping some residents in a state of survival and precarity.

Leila Dagher, Associate Professor of Economics at the American University of Beirut (AUB), conducted a study into remittances in March 2022, surveying 931 Lebanese households.

“Only 5% reported receiving remittances. This is a very small fraction of the population, especially taking into account the soaring poverty rates that have surpassed 80% of the population,” she told The New Arab.

“In the absence of a social protection program and very limited social assistance cash transfers, this leaves a lot of space for political patronage by creating dependency and loyalty through social assistance programs”.

In Lebanon, remittances are increasingly tied to dependency on political factions. Political groups, such as Hezbollah, often receive funding from narcotics, the arms trades, and money laundering, yet also partly from diaspora remittances.

“Hezbollah has a huge support system. They do not use banks, they keep their money separate, so they were not very affected by not being able to withdraw their money from banks. They support their own constituencies,” Sumru Altug, Professor and Chair at the AUB and Research Fellow at CEPR, told TNA.

With communities relying on political parties to meet daily needs – gas, electricity, medical products or generators - loyalty is key to accessing cheaper prices.

Indeed, Lebanon has witnessed a pattern of faction leaders leveraging the economic vulnerability of Lebanese citizens to strengthen their power. Marginalised communities find support in political factions which address their needs rather than those of the country, further catalysing Lebanon’s lack of governance and reducing public trust.

“That’s where we are today: we are not all equal in Lebanon because we are not all under the government, we rely on different political leaders. We are not all served and protected by the government because the government is dysfunctional, inefficient, and blatantly corrupt,” Jad Blaik, a Lebanese diaspora member working in humanitarian development in Washington DC, told TNA.

Lebanese citizens rely on specific factions depending on their religious and political status; in times of crises, such sectarian divisions gain momentum.

Internally, each faction operates on a hierarchical system where favouritism largely depends on donations from local residents. As political factions are partly funded by illicit means, donations, and remittances, geopolitics also matter.

Tensions between Hezbollah and Sunni-led governments in the Gulf region – which are a pivotal source of investments into Lebanon - and spill-overs from the war in Syria, previously an important trade partner for Lebanon, contribute to exacerbating societal divisions.

Ultimately, factionalism in Lebanon partly comes down to governmental paralysis. “The government is non-existent and unable to provide social assistance. So, Lebanon relies on international aid or remittances,” Professor Altug said.

“Remittances from the Sunni communities go to the Sunni sector; diaspora members directly send remittances to their families; it helps certain groups, but it doesn’t help all of society”.

"Remittances constitute 54% of the country's GDP, or approximately $7.15 billion a year"

Who is left out?

“Remittances are highly private and fragment society. It is not sustainable,” says Professor Altug. But what about the Lebanese, Palestinians, and Syrians living in Lebanon, who do not have access to this type of support?

In Lebanon, Palestinians are restricted from working in almost 40 professional categories. Today, 93% of the 210,000 Palestinians in the country live in poverty in Lebanese refugee camps, according to UNRWA.

Amid Lebanon’s ‘brain drain’ crisis, a law passed in 2021 expanded Palestinians’ access to new professions. Yet, Palestinian refugees in Lebanon who reside under the legal status of foreigners continue to be treated as second-class citizens, as are Syrians.

Today, 89% of Syrians in Lebanon live in extreme poverty. Members of the Palestinian and Syrian diaspora send remittances to support their relatives, but the most vulnerable rarely receive such help.

A survey by ARK-UNDP reveals how only 2.3% of Syrian households received remittances in 2022. In addition, Syrian refugees’ unemployment rates have increased, meaning they cannot send remittances to family members in Syria, which has been ravaged by civil war for the past twelve years.

Lebanon’s economic collapse goes beyond its borders. The social inequality between Palestinian and Syrian refugees, and Lebanese citizens, is deepening as the economic crisis worsens.

When money stops buying: The 'brain drain'

Lebanon’s reliance on remittances, and the absence of vital support for those who do not have access to them, require the country to develop a recovery plan. Yet, “the Lebanese government is playing a waiting game”, says Professor Altug. “They are trying to push the losses of the financial and banking sector on the public. They are waiting for the gas they found in the Mediterranean, so they are refusing to take any action”.

Amidst this crisis and the clear need for governmental reforms, Lebanon faces the critical issue of a ‘brain drain’.

“Given the situation and the drastic loss in purchasing power since the onset of the crisis in 2019, households receiving remittances are spending them to purchase necessities. Thus, remittances are being used to cover basic expenditures for consumption purposes, rather than for investment activities such as human and physical capital development,” Professor Dagher said.

Long-term reliance on remittances is unsustainable, as a lack of investment in productive sectors translates into an inability to develop economic structures. The normalisation of a remittance-based economy also risks perpetuating a politics of exclusion, further catalysing social, political, and economic segregation.

Although Lebanon’s export of human capital provides significant support in the current climate through remittances, the draining of Lebanon’s skilled workers proves to be problematic in the country’s long-term economic rehabilitation.

This brain drain is an example of the problems related to Lebanon’s increased reliance on remittances. As unemployment rises and job markets do not provide opportunities, educated professionals are pushed to leave their homeland.

"The government has not been able to come up with an economic model that generates political inclusion"

There is a sense, and reality, of despair and escape which hinders Lebanese investment in their own country, with around 20% of Lebanese doctors having emigrated in 2021. Around 10,000 teachers are also thought to have found work abroad, according to the World Bank, while a survey by Konrad-Adenauer-Stiftung, a German think-tank, in 2022 showed that 40 percent of the population is considering emigrating.

As nurses, engineers, and academics leave the country, the damage caused by Lebanon’s exodus of human capital hinders the hope for economic reforms.

“The sectarian nature of the political system and society has always been a big impediment for Lebanon. There needs to be a productive economy where people can work together in private businesses, not only in the government sector. There needs to be a sense of citizenship," says Professor Altug.

"Yet, the government has not been able to come up with an economic model that generates political inclusion.”

Alma Selvaggia Rinaldi is a freelance journalist and Country Coordinator for the Middle East & Gulf at Amnesty International UK. Currently pursuing an MSc in Media, Communications and Development at the LSE, she has worked as a journalist for The Irish Times, The Beacon, Rewriters Magazine, Nour Magazine, and The Submarine amongst others, and as a Multimedia and Communications Officer for the United Nations Office in Geneva's podcast.

Follow her on Twitter: @AlmaSelvaggia