Lebanon will raise fuel prices to try to alleviate the crippling shortage

BEIRUT, Aug 21 (Reuters) – Lebanese fuel prices are expected to double after the state decided on Saturday to change the exchange rate used to set the price of petroleum products to try to alleviate the crippling shortage which has stopped Lebanon.

With a partial reduction in fuel subsidies, the increase would mean more difficulties in a country where poverty levels have skyrocketed during a two-year financial collapse that has wiped out more than 90% of the value of the Lebanese pound.

The decision was made at an emergency meeting attended by the president, central bank governor and other officials over a fuel crisis that has left Lebanon in chaos, paralyzing basic services and causing daily tunes while people shoot for fuel.

Although prices will rise, the decision did not completely raise the exchange rate of the price of fuel to the exchange rate at which the central bank will finance its imports, a gap that the state will continue to finance, for the time being.

A statement said the central bank will open an account for this purpose up to a maximum of $ 225 million by the end of September, funds that the government will have to return to the 2022 budget.

The bill was to cover an “urgent and exceptional subsidy” for gasoline, fuel oil and cooking gas, the bank said.

The fuel subsidy would only continue until the end of September, a ministerial source said.

President Michel Aoun confirmed that the treasury would bear the cost of the continued grant.

The fuel crisis worsened this month when the central bank said it could no longer finance fuel imports at heavily subsidized exchange rates and would switch to market rates.

The government opposed it, refusing to change official selling prices, creating a confrontation that left importers at a limit and caused supplies to dry up across the country.

Saturday’s decision was a compromise, as official selling prices will now be based on an exchange rate of £ 8,000 to the dollar, up from 3,900, but still well below a parallel market rate not officer closest to £ 20,000.

SOCIAL ASSISTANCE

Roads have been blocked in Lebanon as motorists have queued for the little petrol left. Prices have risen on the black market. Some gasoline clashes have become deadly.

The fuel that fuels much of Lebanon has also almost run out, causing long blackouts.

Reflecting concern about the impact of rising prices, the government decided to pay emergency social assistance to people on public pay equal to one month’s salary or pension.

While the government will adjust the fuel import exchange rate to £ 8,000 per dollar, the central bank is using a rate set by its Sayrafa platform, which stood at £ 16,500 on Friday.

Central bank governor Riad Salameh told Reuters that the difference between the two rates would be a loss borne by the government.

Critics blame the subsidy system for encouraging smuggling in Syria. This will continue as long as fuel is traded in Lebanon below market price, said Nassib Ghobril, chief economist at Byblos Bank. “It won’t fix the problem,” he said.

Additional reports by Maher Chmaytelli in Dubai and Tom Perry in Beirut; Written by Tom Perry; edition by Christina Fincher and Jason Neely

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