Lebanese bank begins granting credits for fuel imports at lower rate

Cars line up at a gas station waiting to refuel in Damour, Lebanon on June 25, 2021. REUTERS / Aziz Taher

BEIRUT, June 28 (Reuters) – Lebanon’s central bank on Monday said it would open lines of credit to import fuel at 3,900 Lebanese pounds to the dollar, a lower rate than previously proposed which effectively increases costs for ordinary Lebanese in a context of crippling economic crisis.

As part of a subsidy program, the central bank used 1,500 pounds to the dollar, the official rate used for all transactions until the crisis that erupted in late 2019 precipitated a currency collapse. The public rate for the pound is now over 17,000 to the dollar.

Lebanon’s acting prime minister on Friday approved a proposal to finance imports at the new rate amid worsening fuel shortages. Read more

Lebanon is in the throes of a deep financial crisis described by the World Bank as one of the worst depressions of modern times. Basic commodities such as drugs and fuel are running out as funding dries up.

In recent weeks, motorists have had to queue for hours at gas stations to barely get fuel, leading to violence in which shots have been fired in some cases.

The lower exchange rate, which will effectively reduce the fuel subsidy, should increase the price of gasoline for consumers but allow the government to provide fuel for a longer period.

The central bank had asked the government to provide it with the appropriate legal permission to dip into its reserve requirements to finance fuel, an indication that the bank has all but depleted its foreign exchange reserves.

Minimum reserves – hard currency deposits deposited by local lenders at the central bank – represent a percentage of customer deposits and are generally not used except in exceptional circumstances.

Lebanon’s subsidy program, which covers wheat, medicine and fuel, costs it around $ 6 billion a year, half of which goes to fuel.

Reporting by Maha El Dahan; edited by David Evans

Our standards: Thomson Reuters Trust Principles.

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