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Lebanon’s Experience in Managing Climate Finance Through Country
Systems
Global Forum: Using Country Systems to Manage Climate Change Finance | 2-3 December 2013 Incheon, Korea
Léa HakimUNDP Technical Assistance for Fiscal Reform and Management Project at the Ministry of Finance
Outline
Lebanon Country Profile
Status of Country Systems and Related Challenges
Climate Expenditure and Capturing International Climate Finance
Institutional Cooperation
Lebanon Country Profile
BEIRUT
LEBANON
MEDITERRANEAN SEA
Overview
(1) Central Administration of Statistics, Lebanese National Accounts 2004-2011. The figure for 2012 is an estimate.(2) Based on 2007 National Survey of Household Living Conditions. Excludes Syrian displaced in Lebanon, estimated at 825,938 “persons of concern” by UNCHR on 25 November 2013.
2012E GDP1: US$ 42,971 million
2012E GDP/capita1: US$11,308
Exchange rate: 1,507.5 Lebanese Pounds per US dollar
Population: c. 3.8 million2
Literacy Rate: 90%
Total Land Surface Area: 10,452 km²
Credit Ratings: Moody’s: B1 (Negative), S&P: B- (Negative), Fitch: B (Stable)
Political climate:
Government is resigned as of March 23 2013 and currently acts in caretaker role until a new government is formed.
Parliamentary elections scheduled for 16 June 2013 were postponed by Parliament until 20 November 2014, extending the term of Parliament by 17 months.
National Sector Context:
1- Copenhagen declaration – 2009: Voluntary target of reaching 12% renewable energy in the current energy mix by 20202- National Energy Policy Paper – 20103- National Energy Efficient Action Plan – 2011-2015
2008 2009 2010 2011 2012
Nominal GDP (USD bn)
28.8 35.1 38.0 40.1 43.0
Real GDP Growth (% change p.a.)
9.1 10.3 8.0 2.0 2.5
Inflation (%, year average)
10.8 1.2 4.0 5.1 6.4
Overall Fiscal Balance (% GDP)
(10.7) (8.4) (7.7) (6.0) (9.3)
General Government Revenue (% of GDP)
24.3 24.0 22.1 23.3 21.9
Foreign Currency Reserves (USD bn)
17.1 25.7 28.6 30.8 30.0
Gross Public Debt (% of GDP)
163 146 138 134 134
Net Public Debt (% of GDP)
144 126 118 116 114
Lebanon Country Profile – Selected Economic Indicators
Sources: Central Administration of Statistics, Lebanese National Accounts 2004-2011, Ministry of Finance, Central Bank, IMF WEO October 2013
Status of Budgeting and Financial Country Systems
The Budget
• Adopts 1986 GFS methodology (2001 GFS to be implemented January 2014)
• Exceptional circumstances: no approved budgets by Parliament since 2005.
• In the absence of approved budgets for the years 2006-2013, Government expenditures have been incurred and are currently incurred on the basis of the “one-twelfth rule”, pursuant to which the Government is authorized to spend monthly one-twelfth of the last approved Budget (i.e., the 2005 Budget) and other enabling legislation.*
• Challenges related to climate expenditure tracking:• No Climate Public Expenditure and Institutional
Review (CPEIR) conducted for Lebanon yet• Budget allocations exclude foreign financing for the
Council of Development and Reconstruction (CDR)• Because of Lebanon’s current exceptional budget
circumstances and use of Treasury Advances (outside budget cycle), budget allocations are very different from actual expenditure. A CPEIR would necessitate coordination between Budget and Treasury Directorates.
Aid Management and Reporting System
• System developed at Ministry of Finance to track ODA.• Currently operational with CDR data (grants and
borrowings from international development agencies and other overseas entities to finance development and reconstruction projects).
• Still not comprehensive as excludes ODA directly obtained by other ministries.
• Cash grants across ministries captured in Treasury system as of 2012. Manual entry of grants as published in Official Gazette undertaken since 1993.
*
*In October 2012, Parliament approved an increase in the legal spending limit from the last approved budget.
Climate Expenditures: Budget allocations different from actuals
In the absence of a CPEIR for Lebanon, and determining climate relevance of each expenditure, the aggregate spending for the Ministry of Environment, Ministry of Energy and Water and Ministry of Agriculture is used as a proxy (excluding salaries and wages and potentially negative climate expenditure).Given exceptional budget circumstances, vast difference between allocations and actual spending.
Actual potentially positive “climate expenditure” proxy 2010-2012
Data note: Actual expenditure on cash basis to each ministry excluding salaries and wages and “negative” climate expenditure (subsidy to taxi drivers and diesel oil subsidy).
Data note: Budget allocation from respective Draft Budgets of Ministry of Energy and Water, Ministry of Environment and Ministry of Agriculture (excluding salaries and wages, diesel subsidy).
Allocated vs. actual “climate expenditure” proxy 2010-2012
2010 2011 2012 -
500
1,000
1,500
2,000
2,500
3,000
1,192
1,742
2,261
Transfers to Electricite du Liban (electricity company)Gasoline subsidy for taxi driversDiesel oil subsidyRevenue losses from reducing excise rate on gasolineRevenue losses from exempting gasoil from VAT
USD
mill
ion
Climate Expenditures: Potentially positive on decline vs. negative
Potentially positive climate expenditure (as calculated in previous slide) decreased in past year vs. higher “negative climate expenditure”.
The above exercise is a proxy and preliminary. For more comprehensive work on capturing climate expenditure, the Minister of Finance has agreed to lead a CPEIR for Lebanon in coordination concerned entities.
‘Potentially positive climate expenditure’ proxy 2010-2012
‘Negative climate expenditure’ 2010-2012
Led by transfers to electricity company that reached 5.3% of GDP in 2012.
0.00
10.00
20.00
30.00
40.00
50.00
60.00
70.00
80.00
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
USD
mill
ion
Capturing of International Climate Finance to Lebanon
‘Climate relevant’ loans disbursed per year 2000-2012
Average disbursement of US$46mn a
year
-
5.00
10.00
15.00
20.00
25.00
30.00
35.00
40.00
45.00
50.00
55.00
60.00
65.00
2000200120022003200420052006200720082009201020112012
USD
million
Average grants of US$5.6mn per year 2000-2010
‘Climate relevant’ grants approved per year 2000-2012*
These figures exclude grants managed by CDR and those channeled solely through international agencies ex. grants to the UNDP energy and environment portfolio not included in the above graph totaled ~US$ 86 mn 2005 – present from donors such as GEF.
Again, grants and loans received by Ministry of Environment, Ministry of Energy and Water and Ministry of Agriculture are used as a proxy to “climate relevant” ODA for illustrative purposes.
Additionally, internal climate finance: Central Bank financing mechanism National Energy Efficiency and Renewable Action Plan (Circular No.236) in place: 0% IR with repayments term of up to 14 years for EE and RE actions/projects. ~US$ 80 mn loans already issued. S
ou
rces:
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Syst
em
.
SES project and task force provided impetus for Ministry of Finance to become core partner in national energy and environment initiatives
including related to climate finance.
Joint task force was formed between UNDP and the Ministry of Finance upon the Minister’s instructions.Representatives from the Lebanese Center for Energy Conservation
(LCEC)/Ministry of Energy and Water, the Ministry of Environment and from the UNDP Country Energy Efficiency and Renewable Energy Demonstration Project
for the Recovery of Lebanon (CEDRO) also involved.
The Ministry of Finance co-signed a Sustainable Energy Strategy (SES) project with UNDP and the Council for Development and
Reconstruction in 2007.Project aimed at supporting Government demand-side management to
decrease fiscal burden of subsidizing electricity sector and setting a fiscal and legislative environment to encourage the private sector and public to adopt
sustainable energy approaches.
Institutional Cooperation on Climate Change: MoF momentum since 2007
Institutional Cooperation on Climate Change: MoF collaboration with MoEW and MoE has led to institutional results
2007
2008
2009
2010
2011
2012
Ministry of Energy and
Water
Ministry of Environment
SES signed
Proposing and evaluating green + EE proposals
CEDRO/RE pilots + technical assessments/policy supportNational Energy Efficiency Action Plan
Net meteringBeirut Energy Forum 2013
Task force formed
Study of CDM mechanism feasibility
Second National Communication
Second National Communication
Sustainable Public Procurement Action Plan (MoF Lead)
Technology Needs AssessmentRepresentation in COP delegation
Collaborating on NAMA prioritization process + developing NAMA financing mechanism
Selected cooperation areas between MoF and MoE, MoEW
Featured institutional results
Official representation of MoF in National Council
for the Environment (NCE) (2012)
Official representation of MoF in Climate Change
Coordination Unit at MoE (2013)
Jointly recruited economist dedicated to
supporting climate change mainstreaming
and studying fiscal incentives based at both
MoE and MoF (2013)
• Review and approve proposed policies-work plans• Secure/approve required budgets
National Council for the Environment
Promote research and development on low carbon technologies to reduce greenhouse gases
Research/Technical Support Group
• •Set priorities within each ministry• Incorporate climate related factors into strategies• Implement and execute the approved CC projects
Governmental Group
Secretariat Office (CCCU)Coordinate
activities
International Multilateral AgreementsClimate Financing
Institutional Cooperation on Climate Change – National Council for the Environment and Climate Change Coordination Unit
Sou
rce:
Min
istr
y o
f En
vir
on
men
t
Working Group 1:Health Sector
Working Group 2:Energy Sector
Working Group 3:Agriculture Sector
Working Group 4:Forestry Sector
Working Group 5:Industry Sector
Tailored specific mitigation and adaptation projects
