Shaffaf Exclusive
Executive Summary
This paper quantifies how Hezbollah and its allied networks exploit Lebanese state institutions, donor funds, and regulatory gaps to capture public resources and political leverage. Based on the figures provided, Hezbollah‑linked or Shia Duo–linked (Hezbollah/Amal) activities generate or enable an estimated:
**Total annualized benefit / loss to the Lebanese state: ≈ USD 5.25 billion**
Lebanon’s projected 2026 state budget is approximately USD 6 billion. This implies that Hezbollah and its allies are directly or indirectly extracting value equivalent to about 87.5% of the entire state budget each year.
These mechanisms span the health, finance, central banking, energy, reconstruction, and education sectors, as well as the management of multilateral funds (World Bank loans). The scale of this capture has direct implications for U.S. sanctions policy, financial integrity efforts, humanitarian programming, and security assistance in Lebanon.
Aggregate Fiscal Impact
Based on my research’s estimates:
– Ministry of Health (state + World Bank‑linked capture)
= Estimated losses / benefits to Hezbollah: USD 0.5 billion
– Ministry of Finance & Tax/Customs System
= Customs evasion, VAT evasion, tax non‑enforcement, plus donor redirection: ≈ USD 2.5 billion
– Central Bank–Related Cash Collection Scheme
= Middleman commissions and related leakage: > USD 50 million
(For purposes of aggregation, I use USD 0.05 billion)
– Energy Sector & Electricity Non‑Payment
= Amana network + under‑collection of electricity bills: ≈ USD 1.5 billion
– South Reconstruction Council
= Arbitrary, unaudited spending from 2026 budget: USD 0.17 billion
– Ministry of Education
– Patronage and overstaffing losses: ≈ USD 0.5 billion
Total estimated annual loss / benefit to Hezbollah and its network:
– 0.5 (Health)
– + 2.5 (Finance/Tax/Customs)
– + 0.05 (Central Bank)
– + 1.5 (Energy & Electricity)
– + 0.17 (South Reconstruction Council)
– + 0.5 (Education)
= **≈ USD 5.22 billion**, rounded here as **≈ USD 5.25 billion**
Comparison to Lebanese 2026 State Budget:
– Lebanese 2026 state budget: USD 6 billion
– Hezbollah‑linked capture: ≈ USD 5.25 billion
– Share of the state budget equivalent:≈ 87.5%
This does not imply Hezbollah literally receives a budget line of that magnitude, rather, the figure represents:
1. Foregone state revenue (e.g., customs, VAT, tax non‑payment);
2. State resources diverted or allocated in a partisan fashion (e.g., health, education, reconstruction);
3. Donor funds partially captured via Hezbollah‑linked institutions;
4. Financial rents and arbitrage opportunities- resulting from privileged access and control (e.g., cash collection commissions, energy sector networks).
Sectoral Analysis
1. Ministry of Health
Share out of State budget (current 2026):USD 0.5 billion
Hospitalization allocation: 60% of MoH budget ≈ USD 300 million
Chronic illness and cancer budget: ≈ USD 50 million
World Bank loan for primary healthcare :USD 150 million
Key points:
– The Minister of Health has announced 100% coverage in private hospitals for all displaced persons. With approximately 1.1 million displaced, this blanket coverage is unprecedented (even post‑Beirut blast the MOH did not give such benefits) and is understood domestically as effectively war‑wound coverage, primarily benefiting an estimated 14,000 mostly Hezbollah fighters injured so far.
– The World Bank’s USD 150 million primary healthcare loan is disbursed to Primary Health Care centres selected directly by the minister, with no independent third‑party administrator. Of Lebanon’s 130 primary healthcare centres, around 40 are controlled by Hezbollah or closely linked NGOs under its Health Authority, positioning the group to capture a significant share of this donor funding.
– The Ministry’s chronic illness and cancer budget (~USD 50 million) is described as being “highly skewed” toward Hezbollah followers, indicating sectarian and partisan allocation rather than needs‑based distribution.
– Registration of Iranian medicines began when Hezbollah assumed control of the ministry, reinforcing a supply chain and commercial ecosystem aligned with Iranian and Hezbollah interests and reducing the transparency and quality assurance that would normally accompany Western‑standard pharmaceutical procurement.
Estimated annual loss / benefit to Hezbollah and affiliates:
≈ USD 0.5 billion
This estimate aggregates the skewed deployment of MoH budget funds and the partisan capture of World Bank–backed primary healthcare spending.
2. Ministry of Finance, Customs, and Tax Enforcement
The Ministry of Finance is controlled by the “Shia Duo” through Amal, functionally aligned with Hezbollah for key fiscal and enforcement prerogatives.
Key mechanisms:
1. Customs Evasion (≈ USD 1.5 billion/year)
– Customs evasion is estimated at USD 1.5 billion annually, predominantly benefiting Hezbollah‑aligned traders and networks.
– Goods entering Lebanon without proper customs registration also evade VAT (Value Added Tax), allowing Hezbollah‑linked wholesalers and manufacturers (concentrated in Dahye, south Beirut) to undercut competitors and progressively capture market share in multiple sectors.
2. VAT and Income Tax Non‑Compliance
– Hezbollah’s commercial network, including its company Al Mal, holds stakes in numerous retail and service businesses (e.g., Nut House, supermarkets, tire changing shops etc).
– Tax inspectors are too intimidated to perform audits or enforcement in these businesses, and the Ministry of Finance systematically refrains from pursuing them, resulting in near‑total tax immunity.
3. Donor and Project Fund Reallocation
– The World Bank has approved USD 300 million in existing infrastructure support projects for Lebanon.
– The Finance Minister has requested that USD 150 million of that be reprogrammed to support displaced persons from the south, a category heavily overlapping with Hezbollah constituencies and conflict‑affected fighters and families, thereby increasing the group’s influence over the distribution of international support.
Approximate aggregate annual losses to the state (revenue + misallocated donor funds):
≈ USD 2.5 billion
3. Central Bank of Lebanon (BdL) and Cash Economy Control
Post‑banking collapse, BdL relied heavily on retail foreign exchange houses to source U.S. dollars from the retail market. Many of these exchange houses are linked to Hezbollah.
Key mechanism:
– Former Governor Riad Salameh created an intermediary role filled by Selim Khalil, a figure tied to Speaker Nabih Berri (Amal) and referenced in a Washington Institute study titled “Hezbollah’s Cash Cabal – How Hezbollah Controlled the Lebanese Cash Economy Post Collapse”. https://www.washingtoninstitute.org/policy-analysis/cash-cabal-how-hezbollah-profits-lebanons-financial-crisis
– Crucially, Khalil’s contract is not with BDL but with the Ministry of Finance, which is under Shia Duo control and signed by the previous Prime Minister Najib Mikati.
– Khalil collects approximately USD 3 billion per year in hard currency from the exchange houses on behalf of BDL.
– Earns an estimated 1.5% commission, equivalent to USD 45 million annually, which otherwise could remain in BDL’s reserves.
– Also controls the dispersion of Lebanese lira (LBP) into the market.
As a result, the Shia Duo effectively control the circulation of the majority of dollar and lira outside the formal BDL balance sheet, facilitating:
– Protection and laundering of Hezbollah‑aligned funds.
– Political leverage over the liquidity conditions of the Lebanese economy and specifically the Central bank.
– Obstruction of reform efforts being undertaken currently at BDL.
-Estimated annual loss to BDL from this structure (commissions + related leakage):
> USD 50 million
(Used here as USD 0.05 billion for aggregate calculations.)
Policy significance for the U.S.:
– This architecture intersects with U.S. counter‑terrorist financing (CTF) priorities and merits direct engagement with BDL, MoF, and international financial institutions to force the removal of “extra‑legal intermediaries” and re‑centralization of money supply management to BDL only.
4. Energy Sector: Amana Network and Electricity Losses
Amana Petrol Stations-
– Amana, owned by Hezbollah, generates around USD 30 million per year in direct profits.
– Amana is supplied by Coral, and provides discounted fuel to Hezbollah followers, reinforcing patronage networks.
– While USD 30 million is modest relative to other sectors, fuel distribution is strategic: it sustains mobility for Hezbollah’s social and military infrastructure and entrenches its presence in critical supply chains.
Electricity du Liban (EDL) Non‑Payment-
– EDL has the lowest bill collection rates in Hezbollah‑controlled areas.
– Systemic non‑payment in these areas constitutes a substantial fiscal drain, both in terms of direct losses and higher system‑wide tariffs and outages borne by the rest of the country.
Combined approximate annual losses to the state in this sector:
≈ USD 1.5 billion
This figure includes:
– The direct fiscal cost of chronic EDL non‑collection in Hezbollah/Amal‑dominated zones.
– The broader structural losses associated with politicized and under‑priced energy provision into these areas, enabling political and paramilitary resilience at the expense of national solvency.
5. Council for the South (South Reconstruction Council)
2026 budget allocation: USD 170 million from the state budget.
– The Council’s spending is described as arbitrary, unaudited, and focused on undefined projects.
– It is controlled by the Amal movement and headed by the Speaker of Parliament, with deep integration into Hezbollah’s political‑security environment in the south.
This council functions as a parallel fiscal channel and patronage mechanism in the south, where Hezbollah’s military activities are concentrated. Lack of transparency significantly increases the risk that public funds function as indirect subsidies to Hezbollah’s entrenched infrastructure and loyalist networks.
Estimated annual loss / partisan capture:
USD 170 million (0.17 billion)
6. Ministry of Education
2026 budget allocation: USD 2 billion
– Public schools have Hezbollah and Amal‑affiliated teachers dominating staffing.
– Teacher‑student ratio is cited as 1:7, suggesting extreme over‑staffing relative to international norms.
– This ratio indicates that significant portions of the payroll function as political patronage rather than service‑driven employment, particularly in areas under Hezbollah/Amal control.
Estimated annual losses allocated to Hezbollah and allied patronage networks:
– 0.5m USD, given:
– The scale of the education budget (USD 2 billion).
– The described structural capture.
Strategic Implications for the United States
1. Scale of Capture vs. Formal Budget
– Hezbollah’s ability to extract or redirect resources on the order of USD 5.25 billion annually, in a state whose entire 2026 budget is USD 6 billion, underscores that any unconditional budget support to the Lebanese state risks partial capture by Hezbollah‑aligned networks. Funding provided to the state should have more auditing and third party monitoring.
2. Donor Funds as Force Multipliers
– World Bank and other multilateral projects (healthcare, infrastructure, social support for displaced persons) are vulnerable to political redirection and institutional capture absent strong third‑party monitoring and depoliticized allocation mechanisms.
– U.S. support through multilateral channels must assume a high baseline risk of Hezbollah‑adjacent benefit if not tightly conditioned and independently administered.
3. Monetary System as an Instrument of Influence
– The continued role of intermediaries such as *Selim Khalil* in crucial BDL functions indicates that the cash economy and FX flows remain partially under Hezbollah/Amal influence, complicating U.S. CTF, sanctions enforcement, and macro‑stabilization efforts.
4. Service Provision as Political Legitimacy
– Hezbollah’s dominance in healthcare access, fuel, electricity non‑payment tolerance, and public education employment reinforces its social legitimacy and dependency networks, particularly in the south and in Shia‑majority areas.
– Any U.S. effort to shore up the Lebanese state must confront the reality that public services are a key battlefield where Hezbollah’s patronage and the formal state overlap.
Conclusion
Available figures suggest that Hezbollah and its allied structures derive direct or indirect benefit from Lebanese state institutions and donor projects on the order of USD 5.25 billion annually, an amount roughly equivalent to 87.5% of the Lebanese state’s planned 2026 budget.
This level of capture means that Lebanon’s fiscal and institutional crisis cannot be addressed in isolation from Hezbollah’s political‑military project. For U.S. policy, any strategy that treats the Lebanese state as a neutral or unified counterpart, without acknowledging and mitigating this embedded capture, risks unintentionally reinforcing the very actor Washington seeks to constrain. Support for the Lebanese state should definitely continue however with more audits and third party project monitoring to ensure the money gets to the people of Lebanon independent of Hezbollah’s channels.
In addition, future financial support should be conditioned on meaningful governance reforms, including the removal of state employees and officials found to be acting on behalf of, coordinating with, or advancing the interests of Hezbollah and other sanctioned entities within public institutions.
Research Limitation: The estimates presented in this report should be regarded as conservative. The analysis was conducted using publicly available information, budget documents, donor disclosures, court filings, media reports, and interviews. However, the research team did not have access to the full financial records, payroll data, procurement contracts, and internal accounts of all Lebanese ministries, state-owned enterprises, and public agencies. As a result, the true scale of financial leakage, patronage, and institutional capture may be materially higher than the figures identified in this study.