The Lebanese central bank declared it would stop the remaining fuel subsidies that consisted on providing around 25% of fuel cost to importers at a preferential exchange rate called the Sayrafa rate. The Sayrafa rate was around 29,800 Lebanese pounds (LBP) to the dollar in September, compared to around 36,800 LBP to the dollar average on the black market.
LIMS showed that subsidies are squandering the central bank’s foreign exchange reserves without any benefit to the population. Dollars used by the central bank are, in reality, what is left of depositors’ funds and therefore subsidies are exacerbating the banking crisis. Using what is left of the central bank’s reserves would lead to a complete loss of trust in the LBP and the exchange rate would skyrocket in the medium run. Moreover, subsidized fuel incentivizes smuggling and overconsumption. Therefore, LIMS believes that subsidies must be lifted completely and immediately.
LIMS explained that the cash cards (direct handouts), initially designed to replace subsidies face an obstacle of funding. However, the main reason behind citizens needing help is due to the LBP devaluation. Reforming the monetary policy is the only way to resolve this crisis.
LIMS Media Interviews:
- After Losing Millions Of Dollars, Lebanon Abandons Gas Subsidies, September 12, 2022: Sky News Arabia, Article AR
- Video: Mardini To “Janoubia”: This Is What The Fuel Subsidy Brought Upon The Depositors’ Money! September 15, 2022: Janoubia, TV Interview AR
- Who Is the Beneficiary Of The Cash Subsidy Card, And What Mechanism For Distribution And Financing Will Be Used? Abi Ali: It Will Be Distributed To All Citizens And Employees, Except Those With High Incomes, September 30, 2022: Social Affairs, Article AR