Dr. Patrick Mardini, CEO of LIMS, described the electricity crisis in Lebanon and explained the inability of the government to resolve the problem. He presented the pilot project of Toula that was able to supply 24 hours of electricity per day to all 120 houses.  Toula’s expats built a solar farm at a cost of $120,000 producing a daily average of 10 hours of electricity. The farm, owned by a private entity, was coupled with a private generator that supplies the remining 14 hours. Toula’s pilot project highlights the ability of municipalities to immediately provide 24/7 electricity to their households through partnering with private sector investments and private generators.  

Mr. Elie Gereige, the engineer responsible for the implementation and management of the Toula solar farm, presented how the idea evolved from when Toula was suffering from a severe electricity shortage of almost 20 hours daily. In addition, he shared the development stages and successful cooperation between the municipality, generator owners, and private investors that led to positive outcomes for everyone involved.  

Dr. Mardini and Mr. Gereige opened the door for a lively discussion with the participants. Together, they explored how such a project can be executed in the municipalities of the region.

LIMS Event Photos: 

• Town Hall Meeting in Tripoli, December 3, Photo Album  

• Town Hall Meeting in Batroun, December 3, Photo Album   

• Town Hall Meeting in Zgharta, December 4, Photo Album  

LIMS explained that the ministry’s announcement did not come as a surprise. EDL and the Ministry of Energy and Water will not be able to secure electricity as long as EDL resorts to the central bank to finance the fuel purchase. EDL should be able to buy fuel and maintain its systems from its bill collections. The approach of borrowing dollars from the central bank to purchase fuel for EDL played a major role in causing the current crisis and remains in place, despite the financial and economic meltdown. 

LIMS argued that the solution is not to provide financing from the central bank, or depositors' money. Any solution should come from outside EDL and the Ministry of Energy and Water. Take for example Toula, a town in Zgharta, north of Lebanon, which does not rely on EDL's electricity. The solar farm in Toula supplies the entire town, providing an average of 10 hours of electricity per day. The supply increases in the summer to 14 hours and decreases in the winter to about 4 hours. Private generators are used to secure any shortages, resulting in 24/7 electricity.  

LIMS Media Interviews: 

• Role Of Municipalities In Securing Renewable Energy, Mardini: Waiting For Ministry Of Electricity Is The Country’s Darkness, December 3, 2022: Al Raed News, Article AR 

• Meeting In Zgharta On “The Role Of Municipalities In Securing Renewable Energy”, December 5, 2022: NNA, Article AR 

• Promises Of Increased Supply Dissipated...4 Hours Only, December 8, 2022: Al Jomhouria, Article AR 

• Promises Of Electricity Supply Are Shrinking, And Zahrani Plant Is Back To Work Today: Generators And Solar Energy Are Indispensable! December 10, 2022: Annahar, Article AR 

• Banque Du Liban Sells Électricité Du Liban Dollars On Sayrafa, December 10, 2022: Al Manar, TV Interview AR 

• Mardini to “A Point On The Line”: Électricité Du Liban A Failure, As Well As Ministry Of Energy, So They Must Be Closed, December 14, 2022: VDL, Radio Interview AR 

• Absence Of Regulatory Body Major Problem For Electricity Sector, December 17, 2022: Al Jadeed, TV Interview AR 

• Anthony Zina To LebTalks: Electricity Alternatives Are Working, And This Is Municipalities’ Role, December 22, 2022: Leb Talks, Article AR 

On December 5, 2022, the Council of Ministers requested $35 million per month for the next three months from Lebanon’s central bank. Such money would be used to subsidize the purchase of infant formula, medicine for incurable, chronic, and cancerous diseases, medical supplies, and raw materials for the pharmaceutical industry. The money would come from foreign exchange reserves and the aim is to lower their price and enable low-income consumers to buy them.  

LIMS argued that infant formula and subsidized medicines have been cut off due to the government’s subsidies. Intermediaries purchase the supported drugs and formula and resell them outside the country or on the black market, before they reach those in dire need. Subsidies are hurting babies in need of infant formula and patients with incurable diseases. People end up buying dubious quality substitutes on the black market smuggled into Lebanon.  

LIMS Media Interviews:

• Lebanese Institute For Market Studies Exclusive: Council of Ministers’ Decision Contributes To Disappearance Of Medicine And Infant Formula, December 6, 2022: LIMSLB, Article AR 

• Will Humiliating Queues Return To Invade Bakeries? December 28, 2022: LIMSLB, Article AR 

• “Lebanon Unable To Reform”…Mardini: It Is Illogical To Subsidize Fuel Because A Large Portion Is Smuggled, December 30, 2022: VDL, Article AR 

Given the success of the dollarization of tourism, LIMS recommended an outright dollarization in all sectors. All suppliers have already dollarized their contracts and transactions. Many bills paid by citizens, such as telecommunications, electricity, and fuel, are now priced in dollars. Supermarkets and shops should also be allowed to price their products in US dollars. Once prices are dollarized, contracts, salaries, wages, and taxes would follow. A full dollarization would lead to more stable prices and protect the purchasing power from fluctuations in the exchange rate. 

LIMS argued that the structural factors that led to massive depreciation of the LBP over the past years from 1,500 LBP to the dollar at the start of the crisis, to about 20,000 LBP to the dollar at the beginning of 2022, are still in effect. What determines the LBP’s value is the volume of LBP in circulation, which is going up dramatically. At the start of the crisis, the currency circulating was about 5 trillion LBP, and today it exceeds 65 trillion LBP, which resulted in the currency losing its value. Increasing the money supply is primarily due to the fiscal deficit, as well as the failure to carry out financial reforms. Printing money is used to finance government expenses and to bail out banks. These factors will push the LBP exchange rate to continue to depreciate against the dollar. 

• Between Political Crisis And Financial Speculation…The Dollar Is Likely To Rise, December 9, 2022: Al Modon, Article AR 

• Has Dollarization Of Tourism Sector Become Permanent At Citizens’ Expense? Mardini: Full Dollarization, Provided That It’s Accompanied By Dollarization Of Salaries And Wages, December 10, 2022: Addiyar, Article AR 

• The Million Note Made Sure That Value Of The Lebanese Pound Would Not Return, December 11, 2022: OTV, TV Interview AR 

• The World Bank: Floating Financial Sector Impossible, And Lebanon's Economic Performance The Worst In The World? December 12, 2022: Annahar, Article AR 

• Lebanon’s Gold, Gone With The Wind? December 13, 2022: Al Rai Media, Article AR 

• A “Fake Stock Exchange”: The Escape Of “Bettors” Reveals What Is Hidden In Dollar Trading, December 15, 2022: Nidaa Al Watan, Article AR 

• Lebanon Strips Expatriates Of Both Their Dollars And Roles, And Exchange Rate Continues To Rise, December 18, 2022: Addiyar, Article AR 

• Central Bank Of Lebanon Dissolves Administrations Of Al Baraka And Fedral, And Appoints Managers For Them, December 20, 2022: Al Jazeera, TV Interview AR 

• Queues Of Lebanese In Front Of Banks Accompanied By Humiliating Procedures To Withdraw Their Money Due To Contradictory Central Bank Circulars And Varying Exchange Rates, December 21, 2022: Al Shark Al Awsat, Article AR 

• Even If Dollar Rate Fell In The Next Two Days, It Will Continue To Rise In The Coming Period, December 21, 2022: Al Jadeed, TV Interview AR 

• Volume Of Lebanese Pounds (LBP) In Circulation Increased In The Last 4 Months From 40 Trillion LBP To Above 90 Trillion LBP, December 21, 2022: Radio Ehden, Radio Interview AR 

• All Lebanese Are “Exchangers”! December 22, 2022: Lebanon Debate, Article AR 

• Lebanese Pound Drops To Historic Low Against US Dollar, December 22, 2022: The Media Line, Article EN 

• Dollar Is Close To Fifty Thousand...More Details About The Exchange Rate With Economist Patrick Mardini, December 26, 2022: AL Jadeed, TV Interview AR 

• What Are The Reasons For The Simultaneous Collapse Of The Economies Of The Countries Allied To Iran? December 27, 2022: Jusur, Article AR 

• Fakrajian: Decline Of The Black-Market Dollar Rate Will Not Last, But Will Be Followed By A Higher Rise Than What We Have Witnessed, December 27, 2022: Beirut24, Article AR 

• Dr. Mardini, On The Banque Du Liban’s Conduct Of: An Official Recognition Of The Exchange Rate Collapse, December 27, 2022: Hadath Online, Article AR 

• Mardini: The Poor Pay The Cost Of Crisis, And Failure To Cooperate With The European Judicial Delegation May Have Repercussions, December 29, 2022: OTV, TV Interview AR 

LIMS revealed that having a currency board, would allow for the LBP to be 100% backed by US dollar reserves, and would not allow for the government to print money out of thin air. Consequently, this would put an end to the hyperinflation that has engulfed Lebanon for far too long, in turn putting less financial stress on citizens, especially the poor.  

For two years, LIMS has been promoting the idea of establishing a currency board in Lebanon, through advocacy campaigns, media interviews, and special events on the matter. Since Lebanon has very weak institutions, high corruption, and is unstable politically and socially, a currency board would be a good fit.  

Although key Lebanese officials welcomed the currency board plan initially, the IMF actively campaigned against it. Since decision makers are seeking an agreement with the IMF, they ended up dropping the idea. For Lebanon, the IMF prefers a managed float system, where the central bank could intervene to stabilize the currency if necessary. Such a managed float system in Lebanon though, has been tried for the past two years and was a complete failure. Foreign exchange reserves are still being wasted and the currency devaluating. At the start of the crisis, the foreign exchange reserves were at $35 billion, while now they are down to $10 billion. As the country continues to sink deeper into a zombie economy, what remains a mystery is the IMF insisting on a managed float, for a country that cannot handle such a system after all. Until a viable solution is put in the place in Lebanon, the poor will continue to suffer in larger numbers than ever before seen. 

LIMS Media Interviews:

• Democracy That Delivers #352: Update On The Current Economic Situation In Lebanon, December 7, 2022: CIPE, Article EN 

• Democracy That Delivers: Update On The Current Economic Situation In Lebanon, December 13, 2022: CIPE, Radio Interview EN 

Further to this, LIMS warned that in a country going through a major economic recession, the government would usually reduce taxes, fees, and tariffs, to facilitate the recovery. Part of this reduction would have happened automatically in Lebanon, when the exchange rate collapsed, since taxes and tariffs on dollar-denominated transactions were still paid on the old exchange rate. Readjusting the exchange rate without reducing taxes and tariffs will prevent the automatic adjustment from taking place and prolongs the recession. In fact, in 2022, growth was negative at -5%. Instead of increasing taxes and tariffs, the whole fiscal system should be reformed to prevent taxes and customs evasion.  

For one thing, the customs dollar, in its current form, will negatively affect productive sectors, given the competition from illegal sectors that evade customs and smuggle. This situation will force companies to either stop their activity, or move their business outside Lebanon, or evade customs. Struggling businesses will deepen the current recession and delay economic recovery leading to disappointing revenues for the government. A higher customs dollar will decrease the competitiveness of local industries. For example, the tourism sector consumes imported goods to serve their clients. The increase in their costs will weaken the ability of the sector to compete with neighboring touristic destinations such as Turkey, Egypt, Cyprus, Jordan, and Greece. 

LIMS also regretted that these salaries in the public sector are determined on the basis of a government decision and not based on real labor productivity. The salary increase included both productive and non-productive employees, which harms the public sector and leads to more inflation.

LIMS Media Interviews:

• Which Goods Are Excluded...And What Comes After The Customs Dollar? December 1, 2022: Anbaa, TV Interview AR 

• Mardini To “Talk With Politics”: The Budget Deepens Recession And Increases Inflation, December 2, 2022: VDL, TV Interview AR 

• Customs Dollar Entered Into Force. Will It Increase With The Approval Of Future Budgets In The Coming Years? December 2, 2022: Al Jadeed, TV Interview AR 

• Fakrajian To “Asswate” Website: Multiple Exchange Rates Not Healthy, And Government Suffocating Citizens, December 2, 2022: Asswate, Article AR 

• Customs Dollar On Its Way From 15,000 Lebanese Pounds To Sayrafa, December 7, 2022: Lebanese Forces, Article AR 

• Significant Rise In Prices…Mardini Warns Through Hadath Online, December 7, 2022: Hadath Online, Article AR 

• Dramatic Effect Of The “New” Taxes. Has Corporate Migration Begun? December 7, 2022: Lebanon Debate, Article AR 

• Expatriate Remittances Support Purchasing Power And Do Not Improve The Lebanese Pound, December 7, 2022: Al Modon, Article AR 

• Positives In The World Bank's Report On Lebanon. What Is Their Importance And Are They Reliable? December 12, 2022: Leb Economy, Article AR 

• Economic Collapse In Lebanon After Three Years, The Citizen Still Paying The Price, December 18, 2022: Al Yaum TV, TV Interview AR 

• Financial And Economic Collapse And Continuous Deficit, December 24, 2022: VDL, TV Interview AR 

As for the expectations for the year 2023, LIMS predicted a further collapse of the exchange rate due to the continuous increase of currency in circulation. In addition to that, the 2023 budget will not be issued before the end of 2023. Concerns remain about the official exchange rate, the future of customs dollars, and potential tax increases. LIMS stated that reaching an agreement with the International Monetary Fund remains a top priority for the caretaker government. Lebanon has already implemented several reforms to facilitate this agreement in 2022, but further steps such as capital controls, bank restructuring, and solutions for depositors' money and banks’ audits are still required by the IMF. LIMS stressed the importance of opening the banking sector to competition allowing new foreign banks to enter the market.  

LIMS Media Interviews:

• After All That We Have Been Through, What Awaits Us Economically And Financially In 2023? December 22, 2022: MTV, TV Interview AR 

• What Awaits Us In The Year 2023? December 23, 2022: Janoubia: TV Interview AR 

• 2022 Worst In Global And Lebanese Economy. Are There Any Expectations Of Further Collapse Of The Exchange Rate Of The Lebanese Pound?! December 27, 2022: El Nashra, Article AR 

• 2022 The Worst, And Expectations Of More Economic And Monetary Collapses, December 28, 2022: Al Liwaa, Article AR 

• How Were The Economic Policies In 2022? December 31, 2022: VDL, Radio Interview AR 

According to a report by the International Energy Agency, the European Union (EU) may face a gas shortage in the winter of 2023-2024, if Russia stops shipping gas. The report states that the EU still needs to reduce its dependence on Russian gas and urged governments to take more immediate action in saving energy and increasing renewable energy sources. European countries may see a gas shortage in 2023 in 3 cases. These scenarios include Russia permanently halting gas shipments, severe weather conditions during winter, and an increase in gas consumption in China as their economy recovers from the COVID-19 crisis. 

LIMS Media Interviews:

• Economic Expert: Wrong Policies In The European Union May Cause Gas Outages, December 21, 2022: Majalla, Article AR