BEIRUT—One of Beirut’s principal water pumping stations was reopened Wednesday following a rehabilitation project funded by the European Union and implemented by UNICEF.
The Tallet Al Khayat station distributes water to more than half a million people located on the western side of the city, where seasonal water shortages are typically much more severe than in other areas of the capital region.
Lebanon’s four regional water establishments struggle with constant electricity blackouts that force pumping stations and water treatment plants to rely on expensive diesel generators, but so far have avoided collapse.
The rehabilitation project is the latest in a long series of foreign investments in Lebanon’s water infrastructure, with €500 million provided by the European Union in the last ten years, according to EU Ambassador Ralph Tarraf.
The EU is committed to supporting Lebanon’s water establishments for at least the next four years, Tarraf said, and plans to provide “more than €100 million” in additional funding.
For donors and the actors in the water sector, cost recovery is top of mind. Bills paid to the water establishments — which are priced in lira, by law — have not kept pace with the depreciation of the national currency, resulting in budgetary shortfalls.
Antoine Zoughby, a technical assistant at the Beirut Mount Lebanon Water Establishment, said that when the current annual tariff of LL4,150,000 per household was agreed upon last October, it was intended to be equivalent to $120 per subscribed household per year.
In the five months since then, that value has decreased to less than $40 on the current parallel market rates. According to Zoughby, 70 percent of the establishment’s expenses are electrical bills paid to Electricte du Liban and diesel for generators. Electrical bills are now priced on an exchange rate of BDL’s Sayrafa plus 20 percent, while generator fuel is priced in dollars according to the international market rate.
Zoughby said pre-crisis tariffs of an average of LL350,000 — equivalent to $232 at the longstanding exchange rate of LL1507.5 to the dollar — were enough to cover operational and capital expenses, but a similar tariff today would only allow the establishment to cover operational expenses. This is because electricity and fuel prices are higher, in dollar terms, than they were pre-crisis when the state effectively subsidized EDL through treasury advances.
Cost recovery amid an economic crisis
Speaking at Wednesday’s press conference, UNICEF representative in Lebanon Edouard Beigbeder said the water system’s sustainability depends on the recovery of at least some portion of costs. He called for water tariffs to be indexed to the dollar “one way or another.”
Electricity bills, denominated in lira, have been indirectly attached to the dollar via the use of an exchange rate equal to the Sayrafa rate plus 20 percent.
“Naturally, then, for the poorest families you need to find, through social protection programs, different ways of [providing access to water], but you need to have a minimum cost recovery to be able to run this water station,” Beigbeder told L’Orient Today after the press conference.
EU Ambassador to Lebanon Ralph Tarraf, who also spoke Wednesday, agreed with Beigbeder, adding that the currency’s depreciation combined with the country’s energy crisis “have put at risk the functioning of the water sector.”
Speaking to L’Orient Today, Tarraf said the establishments need to recover costs but mentioned the possibility of subsidies in the government budget to soften the impact.
To index water bills to the dollar would be “ a very difficult thing,” said Tarraf. “And to introduce that in a situation where a lot of Lebanese are in a very precarious situation economically is a huge challenge but eventually this is where you want to take it and if it’s not possible that the consumer pays basically the whole bill, then there needs to be a proper allocation in the national budget.”
“We’re definitely, as donors, ready to bridge the gap but this requires us also seeing that there is also a real serious effort to make the whole sector more sustainable,” he added.
Tarraf said Lebanon’s 2022 budget did not provide adequate starting points for technical decisions on service provision.
“The revenue side is very dimly lit, to be nice,” he said.
A trust issue
Like Electricité du Liban, water establishments face an uphill battle in convincing the public that higher tariffs will be well spent and that they can provide value for money.
If skeptical consumers refuse to pay water bills, researchers say it can become a self-fulfilling prophecy that ensures service quality remains low.
Bill collection rates vary widely across the country, from 32 percent in the Bekaa to 79 percent in Beirut and Mount Lebanon, according to the May 2020 National Water Sector Strategy Update, which noted that collection rates had dropped “drastically” since the fall of 2019.
According to Nadim Farajalla, director of the climate change and environment program at the Issam Fares Institute at the American University of Beirut, “The mistrust in public utilities, as with all public institutions in the country, has created a vicious cycle where people do not pay their water bills (or even subscribe to the service), which results in … the inability of the utility to recover its cost of operating and maintaining its network, and so paying for its electricity bills— thereby directly leading to poor service.”
Regaining the trust of people who have been repeatedly failed by public institutions, some of which have been used as politicians’ personal piggybanks for decades, is no small feat.
“There is a lot of legitimate, I believe, resentment and anger in the population with regard to anything that would increase the bill for the normal citizen …Whether it’s raising taxes, whether it’s raising customs fees, whether it's raising tariffs for water and electricity and so on and so forth,” said Tarraf. “You have a population today which is very averse to these things which, economically, are imperative. So how do you get there? How [to] organize the transformation is a daunting task for politicians. They’re not on it right now, to say the least, and they need to be on top of the game.”
Wednesday’s reopening of the water pumping station is part of an effort to rebuild that trust, said UNICEF representative Beigbeder.
“What we are trying here in this location is to change the narrative,” he said.
“These concerns are addressed when you open the tap and if you have water or not. If you have water, you build confidence and trust in the services.”