Lebanon crisis

Lifting subsidies on commodities delayed as Lebanon awaits new government formation

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Subsidies on wheat and flour in crisis-hit Lebanon will not yet be lifted after a meeting between government representatives and the General Labor Union.

The two parties agreed to not lift subsidies on flour and wheat, which would have increased the cost of essential goods in a country suffering from hyperinflation and currency devaluation.

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The Labor Union also discussed oil and fuel supplies with the government. In a statement, the union noted that negotiations with Iraq are underway “vigorously and positively,” with the aim to secure raw materials at low prices and extended repayment terms.

“Diesel will not be subject to any taxation or increase in price. It seems that the negotiations will lead to a positive outcome soon,” said Bechara al-Asmar, President of the General Labor Union in Lebanon, in a press conference after he met with caretaker Prime Minister Hassan Diab and other ministers.

The two parties also agreed on reducing the bill of imported medicines while maintaining the subsidy on medications related to chronic diseases, thus reducing the bill by $250 million. The reduction decision is expected to be followed up with the Minister of Health, medical unions, importers, pharmacists, and medical equipment importers to put them into practice.

“Because we want to reach our goal of supporting all the poor and impoverished Lebanese people, and because the country is experiencing its saddest political, financial and economic days, and because we are betting on the conscience of the political class, and also because the option of holding a national strike is in our hands whenever we want and when matters are called for. Therefore, we announce the suspension of the comprehensive national general strike tomorrow, Wednesday,” al-Asmar concluded his statement.

Minister of Economy and Trade Raoul Nehme said that the central bank's foreign currency support is draining about $550 million from reserves. He outlined the negative impact of the subsidy policy in the depletion and waste of public money, the decline in the central bank's reserves, an increase in smuggling and the lack of benefit for the poor.

“Any Central Bank's decision to stop the injection of foreign currency leads to an increase in the demand for US dollars, and thus the deterioration of the Lebanese Lira's value. This would lead to an increase in prices. Therefore, there is no choice but to continue providing dollars until the formation of a government. Still, it is not possible to continue to support all commercial goods, and subsidizing must be replaced by a cash compensation program targeting the poor,” Nehme concluded.

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