This move is expected to push up the price of gasoline, but should temporarily ease the shortage crisis.
On Friday, Lebanon’s acting prime minister approved financing of fuel imports at a rate above the official exchange rate, reducing critical fuel subsidies amid worsening gasoline shortages.
The move is likely to sharply raise the price of gasoline – but is expected to temporarily ease the country’s shortage crisis. Lebanon is going through an unprecedented economic and financial collapse coupled with a dangerous political crisis. These events constitute the most serious threat to the stability of the small country since the end of its civil war three decades ago.
The currency has lost more than 90% of its value since October 2019, trading at an all-time high of 16,450 Lebanese pounds to the US dollar on the black market on Friday. The official exchange rate remains 1,507 Lebanese pounds to the US dollar.
The crisis, rooted in decades of corruption and mismanagement, has worsened in recent weeks as the central bank has cut funding for imports with subsidized dollars. Foreign exchange reserves have fallen dangerously low, dropping from $ 30 billion at the start of the crisis in late 2019 to nearly $ 15 billion today. This prompted traders to raise prices or stop imports.
In recent weeks, brawls and shootings have erupted at gas stations as frustrated citizens lined up for hours to refuel. Power cuts last much of the day, and private generators have had to shut down for several hours to ration fuel.
The decree signed Friday by interim Prime Minister Hassan Diab authorizes the financing of fuel imports at an exchange price of 3,900 Lebanese pounds instead of the official stowage of 1,500 pounds.
While this may temporarily alleviate fuel shortages by allowing supplies to flow again, the move effectively raises the price of gasoline and is sure to spike the prices of consumer goods.
In a statement, Diab said he made the decision “guided by his sense of national responsibility.”
The decision “aims to secure fuel for citizens for the next three months, especially as the summer season approaches, which will allow the increase in the flow of US dollars to Lebanon with the arrival of expatriates and tourists, “the statement read.