Lebanon to reduce subsidized items amid dwindling forex reserves: Official

A worker walks outside the Lebanese Central Bank that has been shut down as part of the preventive measures against the coronavirus, in Beirut, Lebanon. (File photo: AP)

Lebanon has about $1.8 billion of its foreign exchange reserves left available for subsidizing key food and other imports but could make this last for about six more months by scrapping support for some goods, an official source told Reuters.

Crushed by a mountain of debt, Lebanon is facing its worst economic crisis since its 1975-1990 civil war, hammering the local currency and sending prices soaring. Many Lebanese have been plunged into poverty and are more reliant on subsidized food.

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Reducing subsidies risks adding to public anger in a nation that was convulsed by protests as the crisis erupted in 2019.

Central Bank Governor Riad Salameh, who declined to comment for this story, has said subsidies would have to stop once the threshold for obligatory foreign exchange reserves was reached, without suggesting a timeframe.

The official source told Reuters the $1.8 billion still available could be made to last another six months by cutting support for a range of items, such as cashew nuts and vitamins. The source did not give a detailed list.

As dollar inflows have dried up, the central bank has provided foreign currency for fuel, wheat, and medicine imports at an official peg of 1507.5. Lebanese pounds to the dollar, well below the street rate that traders said was around 8,700 on Thursday.

A list of about 300 other foods and basic goods have been subsidized at a 3,900.

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Salameh told Reuters in August that the central bank’s foreign currency reserves stood at $19.5 billion, of which obligatory reserves were $17.5 billion.

Some analysts say the central bank’s reserves may in reality be lower than figures previously stated due to losses incurred amid the foreign exchange crisis.

“We have known for this whole year that the reserves are eventually drying up, and yet no steps have been taken to create a social safety net,” said Nafez Zouk, lead economist and emerging markets strategist at Oxford Economics.

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Last Update: Friday, 09 October 2020 KSA 01:34 - GMT 22:34
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