Lebanese new government raises oil price, signs audit agreement


IMF spokesman Gerry Rice said Thursday that there had been courtesy calls with members of the new government and that the Fund was ready to engage in the period ahead. Talks between the previous government and the IMF collapsed last year.

The World Bank says Lebanon’s economic crisis is one of the worst on record.

The currency has fallen more than 90% since 2019, more than three-quarters of the population have been plunged into poverty, the banking system is crippled, and a currency tightening has resulted in shortages of vital imports, including fuel.

Lebanon suppressed fuel prices by providing dollars at subsidized exchange rates well below the price of the pound in the parallel market, with the stated aim of protecting those affected by the currency collapse.

Critics say the system gave rise to smuggling and hoarding, contributing to shortages that crippled normal life and spawned a black market where gasoline was sold at hugely inflated prices.

Fuel prices released on Friday raised the price of gasoline by more than 37% with immediate effect.

“This is the penultimate step in lifting the subsidy,” said Georges Braks, a member of the service station owners union, who expects the subsidy to be removed by the end of September.

He said the new prices were based on an exchange rate of around 12,000 pounds per dollar.

This compares to a rate of 8,000 pounds per dollar the previous government agreed to on fuel prices last month, but remains below the parallel market rate, where dollars changed hands at 14,600 on Friday.

OUT OF REACH SUBSIDY

The central bank said last month it could no longer afford to provide dollars for fuel at heavily subsidized rates.

Rising oil prices mean importers will always source dollars from the central bank rather than the market and therefore a subsidy still applies, said Mike Azar, a senior financial adviser based in Beirut.

To bolster depleted reserves, $ 1.139 billion in IMF special drawing rights has been deposited with the central bank, the finance ministry said, as part of the Fund’s global allocation to help cope with the fallout. the COVID-19 pandemic.

The Lebanese pound has strengthened by around 19,000 to the dollar since Mikati came to power, ending a year of political conflict over government seats that left Lebanon rudderless.

The IMF recommended that Lebanon unify multiple exchange rates along with other measures, including auditing the central bank.

Finance Minister Youssef Khalil, a former senior central bank official, signed the contract with A&M, which the ministry said would present an initial report within 12 weeks of starting his team’s work.

A&M withdrew from the audit last November, saying it had not received the required information. The finance ministry said in April that the central bank had agreed to hand over the required documents.

Parliament then agreed in December to lift bank secrecy for a year, amid much back and forth between officials, including the finance ministry and the central bank, over whether certain information could be disclosed.

(Reporting by Maha El Dahan; written by Tom Perry; edited by Alex Richardson and Philippa Fletcher) (([email protected]; + 9712 4082101; Reuters Messaging: [email protected]))


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