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Lebanese fear more hardships after fuel subsidies are lifted

The Lebanese are expecting higher gasoline prices in light of the central bank’s decision to lift subsidies amid market chaos, dollar exchange fluctuations and devaluation of salaries in the Lebanese pound.
Lebanese wait in a line outside a closed petrol station, Hamra district, Beirut, Lebanon, Aug. 20, 2021.

BEIRUT — Lebanon’s Central Bank has lifted its remaining subsidies on fuel and stated Sept. 12 that it will no longer provide US dollars for gasoline imports, a move that will force the Lebanese to procure fuel at a volatile market rate.

Until recently, the central bank secured 40% of fuel import costs in US dollars at sub-market rates set by its foreign exchange platform, known as Sayrafa. The electronic platform developed by the bank sets the exchange rate according to a daily pricing close to the parallel market exchange rate, standing now at around 28,000 Lebanese pounds to the US dollar. The remaining 60% was paid by importers in dollars on the black market. 

The latest central bank decision to lift subsidies forces gas station owners to pay the full price of fuel at the country's black market rate, with the dollar trading Sept. 15 at around 37,000 Lebanese pounds.

In previous months, the central bank had gradually scaled down its expensive subsidies program. The complete end of subsidies will inevitably burden the cash-strapped country battling a crushing economic crisis.

The cut of subsidies will be most felt by the Lebanese with a poor and limited income, especially in light of the lack of available transportation alternatives to private cars. 

However, despite the total lifting of subsidies, the price increase of 20 liters of petrol (petrol plate) was limited to about 20,000 Lebanese pounds.

Mayada Abdullah, 40, who works at a private university in Beirut and lives in Kfarshima in Mount Lebanon, told Al-Monitor, “Every time we go to the petrol station, we are shocked by the rising prices. I end up paying at least 1.5 million or 2 million Lebanese pounds to fill up my car. The problem is that my car has a 6-cylinder engine [which consumes lots of fuel]. I tried looking for another car that offers a better fuel economy before the rise of the new customs dollar. But I could not afford to buy one.”

She added, “The dollarization of gasoline is reducing my purchasing power. Although I get a percentage of my salary in fresh US dollars, I end up spending it on gasoline and car maintenance. I cannot afford to stop working under the current circumstances, but I also cannot spend all of my salary on gasoline. I fear the worst in the future. How high will the fuel plate price go? But this is not the only problem, since the price of all goods and services in Lebanon are soaring by the day. No one knows how much longer we will be able to endure.”

What further exacerbates the stifling economic crisis for consumers is the absence of alternative goods in many cases, which if they exist, would be at an exorbitant cost.

Ali Fakih, a 50-year-old father of three and head of the National Social Security Fund office in Zahle, in east Lebanon, told Al-Monitor, “A while ago, I started thinking that there was no point in owning a private car because it was no longer possible to use it amid the high price of gasoline. I never imagined that I would go from my home in Beirut to my workplace in Zahle using the informal public transportation minivans and buses. But this is what I am doing now every day. But even so, I can barely afford the transportation cost, which I fear will also increase, while our meager salaries remain unchanged.”

The situation has also deteriorated as some gas stations no longer allow their customers to pay for fuel in Lebanese pounds, even at the black market exchange rate.

Hussein Daoud, 40, a father of two who works in construction, was surprised when a gas station worker in the south asked him to pay in US dollars. “Two days ago, I paid $18 for a fuel plate. If I hadn't had this amount in dollars, I would have been forced to head to an exchange office to get US dollars,” he told Al-Monitor.

Muhammad Amhaz, 38, who works as a freelancer with a civil society organization, told Al-Monitor, “Now I only go out when necessary, because taking a taxi from my home in Mount Lebanon to Sodeco in Beirut for example costs me 300,000 Lebanese pounds daily, and I earn about 7 million Lebanese pounds a month. Prior to 2019, it cost me only 15,000 Lebanese pounds.”

He said, “The worst thing is that the alternative is not much cheaper. The owner of a tuk-tuk asked me for 260,000 Lebanese pounds for the same ride. Now I wait for my wife to finish her job at a cafe in Badaro, so that we can head home together to cut costs.”

Lebanon has been witnessing its worst economic and monetary crisis for three years now, which has adversely affected people's lives and livelihoods. The Lebanese continue to wake up to the news of rising consumer goods prices and soaring dollar rates every day.

According to a World Bank report issued Aug. 3, “Citizens end-up double paying and receiving low quality product or service. The impact is also highly regressive as it affects middle- and lower-income groups much more significantly.”

The fuel prices crisis started more than a year ago, when fuel shortages pushed people to stand for hours in long lines in front of gas stations.

Jassem Ajaka, professor of economics at the Lebanese University, told Al-Monitor, “Half of the quantities of imported fuel is smuggled by traders outside Lebanon. The move to lift the subsidy on fuel aims to stop the drainage of central bank foreign reserves and comes in response to the request of the International Monetary Fund. The state must seek to stop smuggling, control the market and prevent price chaos.”

Ajaka believes that the prices of most fuel-related goods and services will inevitably rise and people will definitely feel the brunt of this step.

According to a report by Information International, a Beirut-based research and consultancy firm, published June 21, the price of gasoline in Lebanon increased 16-fold in one year only, as the price of a 95-octane plate on June 15 climaxed to 691,000 Lebanese pounds from 43,500 Lebanese pounds a year ago.

Another report by Information International published Aug. 22 stated a drop in the average daily gasoline consumption in Lebanon, from 328,000 tons in 2021 to 281,000 in 2022, a decline of 14.3%.

Currently, the fuel price rise has no ceiling, and will be subject to change according to international oil prices and the fluctuating exchange rate of the dollar on the black market.

The Lebanese will have to monitor daily the oscillating fuel prices amid fears of chaos in pricing. But the most pressing question remains what dollar rate will be applied to the new fuel prices.

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