Lebanese leaders hold an emergency meeting and decide to change the exchange rate used for the price of petroleum products.
Fuel prices in Lebanon are set to double after the country’s leaders on Saturday decided to change the exchange rate used to set the price of petroleum products in a bid to ease crippling shortages.
Amounting to a partial cut in fuel subsidies, the increase will mean more hardship in a country where poverty levels have skyrocketed during a two-year financial crisis that wiped out more than 90% of the nation. value of the Lebanese pound.
The decision was made during an emergency meeting attended by the president, central bank governor and other officials over a fuel crisis that has left Lebanon in chaos, crippling people. basic services and triggering daily melees as people scramble for fuel.
Although prices will rise, the decision did not fully raise the exchange rate to set the price of fuel at the exchange rate at which the central bank will finance its imports – a gap that the state will continue to finance for now.
A statement said the central bank will open an account for this purpose up to a maximum of $ 225 million until the end of September – funds the government will have to repay in the 2022 budget.
The account was to cover an “emergency and exceptional subsidy” for gasoline, fuel oil and cooking gas, the bank said.
The fuel subsidy will only continue until the end of September, a ministerial source said.
President Michel Aoun confirmed that the Treasury would bear the cost of maintaining the subsidy.
The fuel crisis worsened this month when the central bank said it could no longer finance fuel imports at heavily subsidized exchange rates and would switch to market rates.
The government opposed this, refusing to change official selling prices, creating an impasse that left importers in limbo and caused supplies to dry up across the country.
Saturday’s decision marked a compromise as official selling prices will now be based on an exchange rate of 8,000 pounds to the dollar, down from 3,900, but still well below a closer unofficial parallel market rate. of 20,000 pounds.
Roads were blocked across Lebanon as motorists lined up for what little gasoline was left. Prices have soared on the black market. Some clashes around petrol have turned deadly.
The fuel oil that supplies much of Lebanon is also almost exhausted, leading to long blackouts.
Reflecting concerns over the impact of rising prices, the government decided to pay emergency social assistance to people on the public payroll equal to one month’s salary or pension.
While the government will adjust its fuel import exchange rate to 8,000 pounds to the dollar, the central bank will use a rate determined by its Sayrafa platform which stood at 16,500 pounds on Friday.
Central bank governor Riad Salameh told Reuters the difference between the two rates would be a loss for the government.
Critics accuse the subsidy system of encouraging smuggling into Syria. This will continue as long as the fuel is sold in Lebanon below market price, said Nassib Ghobril, chief economist at Byblos Bank. “It will not solve the problem,” he said.