Coronavirus: New red tape, old economic problems could mean food shortages in Lebanon
The COVID-19 pandemic is the latest in a long series of disruptions that Lebanon’s food distribution market is facing. Multiple factors, including Lebanon’s ongoing financial crisis and repeated bank closures, coupled with new government measures and the coronavirus lockdown could lead to local shortages, warn experts.
Getting food to supermarkets and onto the plate of local consumers has become increasingly challenging for food distributors across Lebanon.
“The coronavirus has caused large short-term disruptions in international trade and freight, which has hampered the deliveries of food to Lebanon. Ports and airports are closed, and some countries are imposing export restrictions” said Hani Bohsali president of the Syndicate of Importers of Foodstuffs, Consumer Products and Drinks, which represents around 50 importers.
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State-imposed lockdown and confinement measures are drastically affecting outputs in producing countries, which reflects on global supply chains, causing shortages and leading to significantly inflated food prices, explains Michel Maalouf, a Fast Moving Consumer Goods expert based in Saudi Arabia.
Countries are taking protectionist measures as a result and are holding onto their food reserves, which is affecting the global supply. Export restrictions have been applied across regions, with Kazakhstan imposing them on flour and wheat, Vietnam and India limiting rice exports, and Cambodia applying restrictions on fish and rice.
This Oreo cereal box is at exactly 35,000 LBP. (1$ = 1515 LBP prior to our economic crisis in #Lebanon - now 1$ = >3000 LBP) - I literally filled up my whole car fuel tank for 30,000 LBP. An imported cereal box is officially a luxury now in Lebanon. pic.twitter.com/RBDRZnZQHB— Luna Safwan - لونا صفوان (@LunaSafwan) April 16, 2020
Lebanon is highly dependent on imports, as it currently imports between 80-85 percent of its food needs. Food imports represent less than one third of total imports in Lebanon, according to Trading Economics. Higher tariffs and export bans could worsen the food distribution cycle in Lebanon, already made more fragile by the financial crisis.
“Wire transfers to suppliers are complicated by capital controls resulting from the financial crisis,” says Bohsali.
Since the end of 2019, a series of increasingly strict ad hoc capital controls have been imposed on individuals as well as importers. In March, Lebanon defaulted on a 1.2 billion Eurobond payment. The country’s public debt is $92 billion.
“Another problem is that we have to hedge prices of food product to replenish our stocks, as the Lebanese pound devaluates,” says Bohsali.
Additionally, lockdown measures have slowed the typical process used to obtain documents necessary for clearing merchandise; additional red tape is now complicating the customs process.
Top people in government and port authorities are facilitating clearances, but there is a problem with implementation at the lower levels, according to one source who spoke on condition of anonymity.
“We know that these are exceptional times and are doing everything to facilitate the work of food importers who can always take it with any relevant ministry for any query,” argues Alia Abbas, general director of economy and trade at the Lebanese Minister of Economy.
Traders have also accused the ministry of economy of introducing illegal measures that could hamper food distribution in the medium to long term.
A new regulation provides the minister of economy alone the prerogative to cap prices, which lawyer Amal Takiedine said is contrary to the country’s liberal economy. Another measure would allow members of civil society to accompany food inspectors to trading companies, which traders worry could be used to reveal private information.
Abbas explains that capping food prices is necessary to control inflationary trends.
“Traders are exaggerating and applying high margins that the current Lebanese pound devaluation does not warrant,” she says.
Yet the chaos produced by Lebanon’s financial collapse, the Lebanese lira’s downward spiral, compounded to the coronavirus crisis does not bode well for Lebanon’s long term food security with food shortages possibly looming on the horizon.