ECONOMY

Lebanon’s business owners fear shortages of cash, supplies

Lebanese protesters gather outside a money transfer service provider. (File photo: AFP)

Lebanon’s protests have closed banks, blocked transport routes and reduced the availability of cash, creating a perilous environment for small businesses, owners say.

The protests – now a month old – were initially fueled by discontent over the economy, among other grievances, but the prolonged disruption has ended up making matters worse, leaving many salaries unpaid, imported goods at risk and families with less money sent from relatives abroad.

“What we’re afraid of at the moment is nothing will be available. Unlike the Soviet Union in the 50s, and unlike Turkey and unlike Egypt, we don’t have the resources to produce locally, so this is what we fear,” Hani Bohsali, chairman of the syndicate of importers of foodstuffs, consumer products and drinks, GM Bohsali Foods, told Al Arabiya English.

Lebanon relies heavily on imports to meet consumer demand and the crisis has fueled fears that the heavily indebted country will run out of money to pay for imports. This, coupled with an uncertain outlook as to how long the current upheaval will last, has led to longer-term business fears. Many Lebanese have tried to withdraw money from the banking system, forcing banks to drastically reduce the cash facilities available to business owners and retail customers to preserve solvency, according to banking sources.

“We are in the middle of a huge crisis, and we don’t know what will happen,” added Bohsali.

The general manager of an artisanal firm expressed similar concerns, pointing out how the lack of raw materials was hitting the most disadvantaged in society.

“A lot of the raw material isn’t available, for example fabric. We work with rural and disadvantaged women in disadvantaged communities. They mainly work with fabric and threads,” the manager explained.

The fears of small business owners have been echoed by decision makers and international observers.

Central Bank Governor Riad Salameh warned last month of a “future collapse” if a solution to the unrest was not found in “a matter of days”. Poverty now afflicts a third of the population, up from 27 percent six years ago.

The World Bank has warned that the economy is expected to contract this year and poverty could rise to 50 percent if the economic situation worsens. Unemployment is also expected to rise, particularly among youth.

On Friday, ratings agency Standard & Poor’s again downgraded the country’s sovereign debt further into junk status to ‘CCC/C’, citing rising financial and monetary risks. The country holds a negative outlook from the ratings agency.

Economic crises generally hit the poor and the middle class disproportionately more than the upper classes. Small businesses are also hit disproportionately, as they lack the financial resources to weather the crisis.

“The new government should intervene swiftly to protect these people against negative effects of adjustments,” the World Bank said.

Another factor has been the slowdown in remittances from the vast Lebanese diaspora, a key source of income for many ordinary Lebanese families.

“Currently, the diaspora isn’t able to pay as much as they used to,” explained Roula, the general manager of a medium-sized enterprise.

Nationwide protests erupted on October 17, leading to the resignation of Prime Minister Saad Hariri 12 days later.

Although officially no capital controls to limit foreign transactions have been put in place, some business owners and individuals report banks instituting their own policies to preserve capital, limiting customers’ access to cash.

“If there’s an ease on foreign transfers, many of the problems will be solved. The ban of foreign transfers for commercial reasons is making the situation worse,” Bohsali said.

Lebanon’s bank staff union went on strike last Tuesday over safety fears. The union has called for police officers to guard select branches and a hotline for the bank to call should immediate security assistance be necessary. Local reports indicate that the dollar is selling for 1,850 Lebanese pounds on the black market, because of a lack of available dollars at the official rate of 1,507.50 pounds.

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Last Update: Sunday, 17 November 2019 KSA 12:16 - GMT 09:16
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