Lebanese leaders have agreed a short-term compromise to maintain fuel subsidies, in a bid to ease severe shortages, the presidency and the prime minister’s office said.
Earlier this month, the central bank said it could no longer support fuel imports at a preferential exchange rate, in what many saw as a de facto end to subsidies. Widespread panic ensued, with distributors scaling back deliveries ahead of expected price hikes and desperate motorists forming long queues outside petrol stations.
However, the presidency announced approval of a “request for the Bank of Lebanon to open a temporary account to cover urgent and exceptional subsidies for fuel”. A kitty of up to $225 million would be set aside to subsidise imports of petrol, fuel oil and cooking gas until the end of September, it said.
The decision was taken at a meeting attended by the president, the central bank chief and the caretaker prime minister, as well as the outgoing ministers of finance and energy.
Lebanon’s currency remains officially pegged at 1,507 to the dollar, but it has lost more than 90 percent of its value on the black market. The central bank previously provided fuel importers with dollars at an intermediate exchange rate of 3,900 pounds to the greenback, and fuel prices were fixed by the energy ministry based on this rate.
The central bank would now ensure that the energy ministry could set prices based on an exchange rate of 8,000 pounds to the dollar, the presidency and the prime minister’s office said. Lebanese officials have blamed the fuel crisis on hoarding by distributors seeking to sell at higher prices, as well as smuggling to war-torn Syria.
Lebanese economist Nassib Ghobril said the agreement was a “compromise” that sought to allow fuel importers to release more stock and reduce shortages. “But it will not solve the problem,” the chief economist at the Byblos Bank Group said. “The solution is to lift subsidies completely. That would lead to the disappearance of these long lines at the gas stations, and will discourage smuggling,” he said.
In recent weeks, people have struggled to find enough fuel oil to run back-up generators that now provide most of the country’s electricity as the state utility has all but stopped supply.
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