The president of the Parliamentary Bloc République Forte (Lebanese Forces) Georges Adwan on Tuesday warned the governor of the Central Bank, Riad Salameh and the interim government against the use of the reserve requirement of the Bank of Lebanon to finance the rationing program that the cabinet would like to set up in order to compensate for the disappearance of the subsidy program for the purchase of basic necessities.
As a reminder, this would involve finding nearly $ 1.6 billion per year while the current program would cost nearly $ 6 billion annually.
Confronted with the decline in the available monetary reserves which had hitherto financed the subsidy program for the purchase of basic necessities, the Lebanese authorities would thus try to find alternatives to financing by the Banque du Liban. Some experts would thus like to have recourse to mandatory monetary reserves, others believe that the latter could in any case be already negative according to certain calculation methodologies and this in the absence of public data from the Banque du Liban.
Georges Adwan thus accused the outgoing government – as well as the traders – of having benefited from private deposits and of not having their functions.
“The reserve requirement is not free money; rather it belongs to the depositors who put their money in banks and these banks are obliged to deposit 15% of this money in the Banque di Liban. Therefore, you cannot not use it, and if you do, there will be legal proceedings against the governor of the central bank, the prime minister and the finance minister “, notes the deputy who indicates that the Lebanese Forces” are studying all the legal measures which should be taken “.
A subsidy program whose hours are counted when available monetary reserves are about to be exhausted
As a reminder, the subsidy program could end at the end of April for fuels and at the end of next June for products such as drugs or flour, according to a letter from the governor of the Bank of Lebanon, Riad Salamé, addressed to the Minister of Finance. Ghazi Wazni, for lack of monetary reserves available to continue to finance it.
The cost of the program was $ 700 million during the period preceding the current crisis. It has fallen to $ 500 million currently, or $ 6 billion per year, of which $ 3 billion is for fuels alone. Questions also relate to the reality of the 16 billion dollars of gross reserves of the Bank of Lebanon mainly constituted by the sums available by the 15% of minimum reserves on bank deposits.
The establishment of a prepaid card program would however depend on the approval by the parliament since it would then be an annual loan for an amount of one billion dollars from the Bank of Lebanon against 6 currently. . This program would be aimed at 800,000 families now.
In fact, more than 65% of the population would be today living below the poverty line, that is to say on less than 6 dollars a day. The inflation rate would have even reached 155% during the year 2020, the prices of certain essential but not subsidized products having even reached an increase of 400%, while the Lebanese pound would have lost more than 90% of its value. since October 2019.
Last March, the outgoing Minister of Finance Ghazi Wazni, for his part, estimated that it would be a question of reducing the number of subsidized products from 300 to 100 products, reducing the subsidies granted to the purchase of fuels and drugs and introduce a ration card for 800,000 families, leading to an annual reduction in half of the current subsidies, which would drop from 6 to 3 billion dollars.
The establishment of a prepaid card program would, however, be subject to parliamentary approval.
The creation of this rescue net program to replace the subsidy program was adopted by the Lebanese parliament on March 12 and signed by the President of the Republic on April 8 before being published in the official journal.
This program aims to set up a prepaid payment card which would thus be given to households vulnerable to the economic crisis. They would thus receive 100,000 pounds per month per person for about a year, wanted the Bank of Lebanon while the World Bank had indicated that it required that these sums be made available at the real rate of the local currency.
50% of the fuel subsidy program
Fuels alone represent 50% of the Bank of Lebanon’s subsidy program, said the outgoing energy minister. Despite an increase in the price of gasoline by more than 50% in Lebanon, a can of gasoline costs around three dollars while in Syria, the same can cost between 7 and 13 dollars, leading to trafficking between 2 countries.