Flawed Anti-Poverty Programs Leave the Poor Vulnerable to Catastrophe in Middle Eastern Countries

During the past ten to fifteen years, many governments in the Middle East, under the tutelage of western development agencies and the international financial institutions, restructured their poverty alleviation efforts around narrowly targeted, means-tested cash transfer programs. Compromised from the start, these systems are now proving even more damaging to the poor during the Covid-19 crisis. Nowhere is this more apparent than in Jordan, Lebanon, and Palestine.

Promoted as a progressive mechanism for preventing the leakage of public assistance to the middle and upper classes, proxy means testing (PMT) protocols emerged in the mid-2000s as the primary method for assessing household poverty levels (and allocating benefits) across the Arab world. While largely successful in stopping such leaks, the processes and criteria for evaluating potential beneficiaries have simultaneously left large segments of the poor outside increasingly frayed social safety nets.

One reason so many people are left out is the fact that poor households bear the responsibility for seeking out access to these anti-poverty programs. Due to lack of information and the challenges of arranging in-person visits, this results in a significant proportion of those eligible for transfers never applying for help in the first place.

Those that do manage to self-register must next deal with invasive home inspections carried out by state-dispatched social workers. At this point, household heads are required to provide proof of vulnerability in the form of supporting documents such as medical records and land titles. Social workers are supposed to help households obtain these documents, but with huge caseloads — up to 400 per social worker in Palestine — this is not realistic.

If a family can provide the required paperwork, they are then screened by ministry officials on the basis of a flawed and opaque consumption-based formula. Notably, this formula does not account for the debt-financed share of household consumption  — which has grown precipitously in each of these countries. In other words, if a family has paid for food or other basic goods on credit, their economic health looks as strong as another family that has not had to borrow money for these essentials.

As a result of these protocols, only a fraction of those actually living in poverty across Jordan, Palestine, and Lebanon ultimately benefit from cash transfer programs. In Palestine, for example, where the poverty rate is 29.2 percent and the unemployment rate has reached a staggering 31 percent, less than two thirds of the 200,000 households deemed “eligible” for the country’s cash transfer program are actually receiving this support, even after a post-Covid expansion of the program.

In Lebanon, the National Poverty Targeting Program, established in 2012, reaches only 25 percent of “extreme poor households” (defined according to their inability to meet basic food needs). This is despite pre-Covid economic conditions having already pushed 50 percent of the population into poverty. Even Jordan’s more established and comprehensive suite of social protection services operated by the National Aid Fund reaches but two thirds of the country’s poor.

Compounding matters further, the level of assistance received from program beneficiaries is also wholly inadequate. Palestine’s program aims only to bridge the poverty gap by 50 percent, meaning that it is explicitly designed so as not to lift families out of poverty. Similarly, for roughly two thirds of its beneficiaries, Lebanon’s program covers only the costs of public school registration and Ministry of Public Health-provided health services, with its e-card food assistance program restricted to the country’s poorest 15,000 households.

Given that formal employment often disqualifies a family from access to these (meager) cash transfers, the programs also make it difficult to supplement assistance with wage-based income, effectively condemning families to one of two monsters — the Scylla of the low-wage labor market or the Charybdis of inadequate public assistance.

These flawed programs are likely to grow even weaker in the months and years ahead due to the procyclical nature of fiscal policy in the region.

As is the case throughout much of the global south, governments in Palestine, Jordan, and Lebanon tend to spend more during the good times and less in the bad. This corrosive pattern is a function of tax revenue: during high growth periods, tax receipts increase (and with them, the government’s capacity to spend) while during low (or negative) growth periods, declines in tax receipts force policymakers to either cut spending or attempt to borrow money through bond issuances and/or credit markets.

With both mechanisms of debt financing limited in scalability (and fraught with dangers), this approach creates a highly destructive feedback loop whereby declining revenues during recessions lead to austerity budgets, which lead to the elongation and deepening of the original recession, which lead to a subsequent decline in revenues, and so on and so forth.

All three countries now appear to be on the precipice of such a vicious cycle. In Jordan, tax receipts from February — prior to the full consolidation of the economic shutdown — were already more than 20 percent below those of January (JD 505 million to JD 379.9 million), with subsequent monthly yields certain to have declined even further. In Lebanon, the drop was closer to 33 percent between the two months (LL 1,217,782 million to LL 784,227), while in Palestine, economists have projected annual revenue losses of 24.4-32.8 percent relative to pre-coronavirus expectations.

One can hope that sustained street protests against austerity, such as those in Lebanon, will force governments and the international community to take immediate action to prevent a humanitarian catastrophe in these Middle Eastern countries. In the long term, though, these governments (and aid organizations) need to fundamentally change their approach to preventing and alleviating poverty so that their populations are not as vulnerable to the next crisis.