Lebanese fear more hardship after lifting fuel subsidies

BEIRUT – Lebanon’s Central Bank lifted its remaining fuel subsidies and said on September 16 that it would no longer provide US dollars for gasoline imports, a move that will force Lebanese to procure fuel at a volatile market rate.

Until recently, the central bank guaranteed 40% of fuel import costs in US dollars at below-market rates set by its exchange platform, known as Sayrafa. The electronic platform developed by the bank sets the exchange rate at a daily rate close to the parallel market exchange rate, now standing at around 28,000 Lebanese pounds per US dollar. The remaining 60% was paid by importers in dollars on the black market.

The central bank’s latest move to lift the subsidies forces petrol station owners to pay the full price of fuel at the country’s black market rate, with the dollar trading on September 15 at around 37,000 Lebanese pounds.

In previous months, the central bank had gradually reduced its costly subsidy program. Ending subsidies altogether will inevitably weigh on the cash-strapped country battling a crushing economic crisis.

The reduction in subsidies will be felt most by poor and limited income Lebanese, especially given the lack of transport alternatives available to private cars.

However, despite the total removal of subsidies, the increase in the price of 20 liters of gasoline (petrol plate) was limited to approximately 20,000 Lebanese pounds.

Mayada Abdullah, 40, who works at a private university in Beirut and lives in Kfarshima in Mount Lebanon, told Al-Monitor: “Every time we go to the gas station, we are shocked by the rising prices. . I end up paying at least 1.5 million or 2 million Lebanese pounds to fill up my car. The problem is that my car has a 6 cylinder engine [which consumes lots of fuel]. I tried to look for another car that offered better fuel economy before the rise of the new customs dollar. But I couldn’t afford to buy one.

She added: “The dollarization of gasoline reduces my purchasing power. Although I receive a percentage of my salary in fresh US dollars, I end up spending it on gas and car maintenance. I can’t afford to stop working under the current circumstances, but neither can I spend all my salary on gasoline. I fear the worst in the future. How high will the price of the gas plate go? But this is not the only problem, since the prices of all goods and services in Lebanon are soaring day by day. No one knows how much longer we can endure.

Further aggravating the suffocating economic crisis for consumers is the absence of alternative goods in many cases, which if they exist would be at exorbitant cost.

Ali Fakih, 50, a father of three and head of the National Social Security Fund office in Zahlé, eastern Lebanon, told Al-Monitor: “Some time ago I started thinking there was no point in owning a private company. car because it was no longer possible to use it in the midst of high gas prices. I never imagined that I would go from my home in Beirut to my workplace in Zahle using the minibuses and informal public transport buses. But that’s what I do now every day. But even so, I can barely afford the transportation costs, which I fear will also increase, while our meager salaries remain unchanged.

The situation has also deteriorated as some gas stations no longer allow their customers to pay for fuel in Lebanese pounds, even at the black market exchange rate.

Hussein Daoud, 40, a father of two who works in construction, was surprised when an employee at a gas station in the south asked him to pay in US dollars. “Two days ago I paid $18 for a fuel plate. If I hadn’t had that amount in dollars, I would have had to go to a money changer to get US dollars,” he told Al-Monitor.

Muhammad Amhaz, 38, who works as a freelancer for a civil society organization, told Al-Monitor: “Now I only go out when necessary, because taking a taxi from my home in Mount Lebanon to Sodeco in Beirut, for example, costs me 300,000 Lebanese. pounds a day and I earn about 7 million Lebanese pounds a month. Before 2019, it only cost me 15,000 Lebanese pounds.

He said: “The worst part is that the alternative isn’t much cheaper. The owner of a tuk-tuk asked me 260,000 Lebanese pounds for the same trip. Now I’m waiting for my wife to finish her work at a cafe in Badaro, so we can go home together to cut costs.

Lebanon is experiencing its worst economic and monetary crisis for three years now, which has had negative effects on the lives and livelihoods of the population. Lebanese continue to wake up every day to news of rising consumer goods prices and soaring dollar rates.

According to a World Bank report published on August 3, “citizens end up paying twice and receiving poor quality products or services. The impact is also highly regressive as it affects middle and low income groups much more significantly.

The fuel price crisis began more than a year ago when fuel shortages caused people to stand for hours in long queues outside petrol stations.

Jassem Ajaka, professor of economics at the Lebanese University, told Al-Monitor: “Half of the quantities of imported fuel is smuggled by traders out of Lebanon. The decision to lift the fuel subsidy aims to stop the draining of foreign exchange reserves from the central bank and responds to the request of the International Monetary Fund. The state must seek to stop smuggling, control the market and prevent price chaos.

Ajaka thinks the prices of most fuel-related goods and services will inevitably rise, and people will definitely feel the brunt of this step.

According to a report by Information International, a research and consultancy firm based in Beirut, published on June 21, the price of gasoline in Lebanon has increased 16 times in just one year, while the price of a plate at 95 octane on June 15 peaked at 691,000 Lebanese pounds compared to 43,500 Lebanese pounds a year ago.

Another report by Information International published on August 22 shows a drop in average daily gasoline consumption in Lebanon, from 328,000 tons in 2021 to 281,000 in 2022, a decrease of 14.3%.

Currently, the increase in fuel prices has no cap and will be subject to change depending on international oil prices and fluctuations in the black market dollar exchange rate.

Lebanese will have to watch the fluctuating fuel prices daily amid fears of price chaos. But the most pressing question remains that of the dollar rate that will be applied to the new fuel prices.

About Christopher Easley

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