Lebanon’s municipal fund runs over $2 billion deficit as waste expenses multiply

Expensive local fixes to Lebanon’s lingering waste crisis have caused a staggering $2 billion deficit in the country’s common municipal fund, sources with firsthand knowledge tell The National.

The Independent Municipal Fund is a form of central government support for local municipalities made up the revenue from taxes and fees, such as levies on telecommunications and electricity. It is collected, held and distributed by the Finance Ministry based on size of local population and contribution to the pool. Reports estimate the total fund is worth billions a year, although the government offers no official annual total.

These disbursements are intended for providing local services, running local administration and local development projects. The United Nations Development Program estimated in 2016 that some 70 per cent of Lebanese municipalities rely on the common fund for 90 per cent of their income.

While the fund has had problems for years – including how money is allocated as well as the regularity with which the government disburses cash – Lebanon is also experiencing a waste crisis. In 2015, the central government finally closed the Naameh landfill site south of Beirut after years of delays. Until then, it had been the only dump site for trash generated by the capital and the Mount Lebanon region – where over half the country’s population of between 4.5 million people reside.

Without announcing a plan, the closure sparked a massive waste crisis that has subsequently led to other localised crises across the country and the government to unofficially devolved rubbish collection and handling to local areas.

But nearly two thirds of municipalities have fewer than 4,000 residents and therefore handling waste load requires financial and technical capacities beyond their limited means.

An official at the Finance Ministry tells The National that the current deficit is a consequence of the fact that the Cabinet raided the Independent Municipal Fund to foot the bill for local waste management contracts signed by municipalities and central government entities with no other means to pay.

Due to the small size of many of Lebanon’s villages, the waste sector has been unable to develop economies of scale and waste collection is often expensive in comparison to other countries in the region.

The government has been taking a percentage of the annual allocation to municipalities from the Independent Municipal Fund to cover the cost of their rubbish collection and disposal contracts. These are set at less than 30 per cent for individual councils and at 50 per cent for municipal unions – a collection of councils that have banded together to share resources.

Earlier this year, the fund’s President Norma Nissir said that some of the waste contracts can cost up to four times the value of a municipality’s total annual allocation.

Therefore, the government again went back to the common fund to cover the difference, quickly racking up the $2 billion deficit and forcing the treasury to step in with extra money.

But municipalities are not off the hook. The government has logged the extra funding used to cover their waste contracts and registered it as a debt to municipalities.

On top of this, not all the waste collection contracts were actually agreed to by the municipalities.

Roy Abou Chedid, the mayor of the Mount Lebanon town of Beit Mary, tells The National that his village was one of several in the area that have accrued debts since they were automatically enrolled in waste contracts agreed by the government.

The government’s Council of Reconstruction and Development (CDR) handled the tender process and gave contracts to the local companies Sukleen and Sukomi.

But the burdensome prices charged by the companies motivated Mr Chedid to seek an alternative. In 2016, the mayor was able to leave the contract after convincing the Environment Ministry that a recycling and composting scheme, in partnership with local company Cedar Environmental, would be feasible.

“We as municipality are paying $62 for a tonne, and they [Cedar Environmental] take over everything and solve the problem of both recyclable and biodegradable products. We do not take anything,” says Chedid. “The cost of each ton used to be $157 or $152 with Sukleen and Sukomi. Now we are paying less to solve the issue of waste.”

Having left the state contract in 2016, Beit Mary is again receiving their full Independent Municipal Fund allocation that had previously been docked to pay for Sukleen and Sukomi. Yet, the village’s accumulated debt still hasn’t been paid off.

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Mr Chedid estimates that his municipality, which is considered wealthy by Lebanese standards, will need at least another year before it is out of the red.

Other municipalities that benefit from state contractors may never have been informed about their accruing debts. Sami Atallh, director of the Lebanese Center for Policy Studies, says he encountered the issue while researching the Independent Municipal Fund in 2015.

“When I went to the municipalities and said, ‘do you know you have a debt from the CDR [at the fund]?’ they said ‘what? I don’t know what you’re talking about?’ reports Atallah. “They didn’t know about that.”

As municipal debts continue to grow, the common fund deficit is expanding under added pressure from new commitments imposed by the government.

An employee at the program says that four municipalities, including Burj Hammoud and Choueifat near Beirut, are being allocated an additional $8 million each from the fund in exchange for agreeing to host landfills in their localities. There’s no plan for where the extra funds will come from.

Despite warnings, an integrated solid waste management law passed by parliament on September 24 is likely to entrench this issue. Aimed at organizing the country’s garbage sector and resolve the ongoing waste crisis, the bill seeks “administrative decentralisation,” officially placing responsibility for certain waste practices in the hands of municipalities.

This could now firmly put the onus on the small villages to organise and pay for expensive collection long term.

Samar Khalil, a member of the Waste Management Coalition which advocates for sustainable disposal, says that a provision for bankrolling the practices with tax hikes was canceled during the same parliamentary session.

Unless a plan to fund the changes that covers waste collection and treatment is agreed, the Independent Municipal Fund deficit is likely to balloon.

“If we continue like this there will be a time when the Independent Municipal Fund won’t be able to pay for anything”, the source in the agency said.