After several weeks of shortages, the governor of the Banque du Liban, Riad Salamé, finally admitted before the high council of La Défense that he could no longer subsidize the purchase of fuels, bringing de facto to the end of the subsidies granted to this sector. essential, says the television channel Al Jadeed.
The end of the subsidy program was expected by the end of the summer had yet promised Riad Salamé after a meeting, a month and a half ago at the presidential palace of Baabda, during which had been decided, in return, the modification of the parity used within the framework of this program which thus went from 1507 LL / USD to 3900 LL / USD.
For their part, the Lebanese authorities had undertaken to maintain this program until the implementation of the rationing program for the most vulnerable populations.
In the absence of funding, the price granted to fuel is expected to align with world prices, which is now equivalent to 15 or 20 dollars depending on the type of gasoline, thus causing a further rise in inflation in Lebanon.
This information also comes at a time when several hospitals have already indicated that they lack the fuel oil necessary for the operation of their generators due to chronic cuts in public electricity, rationed up to 4 hours a day after the Banque du Liban failed to also finance the fuel oil needed by the power plants. Thus, EDL is no longer able to ensure that 800 Mgw of production against a demand which exceeds 3000 Mgw and a production capacity of only 2000 Mgw.
A cascading consequence, the price of generator subscriptions is also expected to soar.
Shortage of Medicines and a risk of seeing the price of bread soar
Now, eyes are turning to the drug and bread-making sectors.
Concerning bakeries, the price of bread is thus indexed on several factors including the price of fuel oil but also on the price of flour also subsidized by the Banque du Liban. If these subsidies were stopped, the price of bread could also soar. In northern Lebanon, the millers have already announced the closure of their establishments. They should be followed by bakeries.
Even more critically, patients with chronic illnesses and even cancer find it increasingly difficult to obtain their medications.
As a reminder, the central bank said yesterday that it had already paid $ 536 million for importing drugs as of June 30, 2021 , while the value submitted for prior approval was estimated at $ 445 million. The total import bill would therefore reach $ 1.5 billion on that date, while the Banque du Liban would have financed $ 1,173 million in drugs in 2020. Therefore, the BdL would not have settled a balance of 445 million dollars until today, even if it had agreed to continue the program to the tune of 50 million dollars per month, against a request of 150 million dollars. dollars originally, something that, for now, would not have been implemented by the central bank.
A program whose hours were already counted
As a reminder, the subsidy program was to end at the end of April for fuels and at the end of next June for products such as medicines or flour, according to a letter from the governor of the Bank of Lebanon, Riad Salamé, sent last March to Minister of Finance Ghazi Wazni, for lack of monetary reserves available to continue to finance it. It is not yet clear how the Banque du Liban managed to continue the program without delaying the approval of certain lines of credit, particularly for the purchase of fuel and fuel oil.
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 75% 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 of 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, which could lead to a reversal of contraband flows between the 2 countries.