Lebanon awaits crucial wheat imports and international aid

Since the start of the war, the Kremlin blockade of Ukrainian grain exports via the Black Sea has caused bread prices to skyrocket.

Mahmoud Zayyat | AFP | Getty Images

With Lebanon already facing its biggest economic crisis ever, the impact of Russia’s war in Ukraine has exacerbated dire living conditions in the Mediterranean nation of nearly 7 million people.

Lebanon imports most of its food and all of its fuel, and more than 80% of the country’s wheat comes from Ukraine and Russia.

Since the start of the war, the Kremlin blockade of Ukrainian grain exports via the Black Sea has caused bread prices to skyrocket. Last week, the two sides signed an agreement, backed by the UN, aimed at reviving grain exports in the region.

However, Russia’s attack on the Ukrainian port city of Odessa, less than 24 hours after the deal was signed, has called into question the deal’s legitimacy and pushed up wheat prices. If the deal is successfully struck, crucial grain exports will transit through a maritime corridor in the Black Sea, which could bring relief to a growing food crisis across the world.

Mercy Corps’ Lebanon Crisis Analytics team told CNBC on Monday that the price of wheat flour has risen 209% since the start of the Russian assault on Ukraine and 330% since the start of the 2019 economic crisis. .

Food and drink inflation on an annual basis jumped to 332% in June, and the broader inflation figure rose to 210% in the same month, according to government data.

Lebanon’s Economy and Trade Minister Amin Salam told CNBC’s Hadley Gamble “we realized there was a threat long before we got to the Russia-Ukraine crisis, we knew the country would have had to have another set of silos across the country to make sure that if something happens we don’t lose our supplies.”

Lebanon’s wheat silos were destroyed in the Beirut port explosion two years ago, depleting crucial relief supplies.

Lebanon’s interim government is now desperately trying to secure sources of wheat, Salam told CNBC, including speaking directly to the Russians.

“I know that the government, through the Minister of Foreign Affairs, has had several discussions about supporting Lebanon and opening some of the shipping lines that are blocked, because we are struggling to really receive any shipments that used to take 10 days, now they take three weeks.”

Salam said his government had “not received any positive feedback” from those talks.

World Bank lifeline

The World Bank granted Lebanon a $150 million loan in May, which Parliament approved on Tuesday. The loan “aims to finance immediate wheat imports to avoid short-term supply disruption and help secure affordable bread for poor and vulnerable households, including displaced populations and refugees in Lebanon,” it said. the World Bank to CNBC via email.

“The project will also contribute to building governance capacity in the wheat sector and putting the agriculture and food production system on the path to recovery and greater resilience.”

Salam says the World Bank loan will last between six and nine months, depending on the world price of wheat.

“So far the price has gone down,” Salam told CNBC. “The estimate is that this loan will serve the country for about eight months of supplies.”

Salam added that he hoped that in eight months the situation in Lebanon would have improved and that the government might also have received a $3 billion loan from the International Monetary Fund – a long-promised support package that does not has not yet been approved. .

The IMF loan is conditional on political and fiscal reforms, most of which have not yet been made by the government.

“We had no choice but to ask for help from the international community. The World Bank was very responsive, very quick,” Salam said.

Salam told CNBC that the talks lasted about 25 days and the loan “was the fastest and the first granted to a country in the world linked to food security by the World Bank”.

According to the World Bank, Lebanon’s economic collapse is one of “the world’s 10 worst crises since the 19th century”.

Lebanon has also been classified, once again, as a lower-middle-income economy by the World Bank. This is Beirut’s first fall in such classifications since 1998.

According to the World Food Programme, “22% of Lebanese households are food insecure” and the number of “Syrian refugees with severe or moderate food insecurity is 1.3 million, of whom 1 million are receiving support”.

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