The Central Bank of Lebanon may stop providing subsidies for fuel in the near future, as the bank is running out of financial reserves to contain prices, the Al Joumhouria newspaper reported on Wednesday, citing informed sources
BEIRUT (Pakistan Point News / Sputnik - 02nd December, 2020) The Central Bank of Lebanon may stop providing subsidies for fuel in the near future, as the bank is running out of financial reserves to contain prices, the Al Joumhouria newspaper reported on Wednesday, citing informed sources.
The lifting of state curbs of gas prices is likely to take place, the news outlet reported, saying that the bank's governor, Riad Salame, has notified responsible figures that he is no longer capable of providing subsidies, which amount to $5 billion per year, or $400 million per month.
It does not matter whether it is legally allowed to use the state's financial reserve, since it is unclear how long this reserve will last, according to the sources.
"We are postponing the issue, and there are no solutions in the foreseeable future. The reserve ratio has already dropped from 15 percent to 12, which is equal to $17.1 billion. It means that there will be no funds in banks soon," the source said, as quoted by the newspaper.
According to the sources, there are two solutions, with the first one, which is unlikely to be implemented, being the full elimination of fuel subsidies, which will lead to an increase in the cost from the current 1,250 Lebanese pounds ($0,83) per liter to 6,000, and the second option is to reduce subsidies to 60-70 percent.
In any case, the decision to end subsidizing fuel, medications or grain could destabilize the already fragile situation in the Middle Eastern country and cause massive unrest, which could be even larger compared to events of the fall of 2019 following the government's attempt to impose a tax on using WhatsApp.
Salame told the Al Hadath broadcaster on Tuesday that the central bank has enough reserve capacity to moderate prices for fuel and basic necessities for another two months.
Paris is set to host an international aid conference for Lebanon on Wednesday. During the last visit to Beirut on September 1, French President Emmanuel Macron proposed an initiative to help the country address the long-standing financial and economic crises, which was backed by all political forces.
The main condition to provide aid was the rapid formation of a government able to implement efficient reforms. However, the parties in power had reached no consensus on a new cabinet following the resignation of the government led by Hassan Diab in August.
Saad Hariri, who became new prime minister of Lebanon in late October, pledged to stop the economic collapse.
