Sharjah24 – Reuters: Lebanon's central bank said it would offer credit lines for fuel imports based on the market price for the Lebanese pound from Thursday, effectively ending a fuel subsidy that has drained its reserves since the country descended into financial crisis.
The move, announced late on Wednesday, means fuel prices will rise steeply: One Lebanese broadcaster cited figures showing the price of unsubsidised 95 octane gasoline at more than four times the subsidised price.
It will spell more hardship for the growing number of people in poverty in a country whose currency has lost more than 90% of its value in less than two years, in what the World Bank has described as one of the sharpest depressions in modern history.
But it should also alleviate crippling fuel supply shortages as incentives to smuggle and hoard heavily subsidised fuel disappear, said Nassib Ghobril, chief economist at Byblos Bank.
Since the onset of the crisis, the central bank had been effectively subsidizing fuel by using its dollar reserves to finance fuel imports at official exchange rates well below the rates on the parallel market.
Most recently, the central bank had been extending credit for fuel imports at a rate of 3,900 pounds to the dollar, compared with a parallel market rate of more than 20,000 pounds on Wednesday.
The central bank's reserves have sunk from more than $40 billion in 2016 to $15 billion in March. The fuel subsidy costs some $3 billion a year.
The official rate for the Lebanese pound, against which most salaries are benchmarked, is still 1,500 pounds to the dollar, a peg that was maintained for more than two decades until the crisis erupted in late 2019.
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