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    Lebanon's Central Bank Can Only Maintain Subsidies For 3 Months
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    Reuters: Lebanon’s Central Bank Can Only Maintain Subsidies For 3 Months

    By Hussein YassineAugust 21, 2020Updated:February 15, 2021
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    Lebanon’s central bank (Banque du Liban) will not subsidize fuel, wheat, and medicine for more than three months from now, a source told Reuters.

    Ever since Lebanon’s economy began to slide into the unknown, the BDL has been sparingly using its reserves of US dollars to maintain the subsidy over basic commodities.

    Despite the soaring USD/LBP exchange rates in the parallel market, which is causing a proportional increase in prices, the prices of wheat, medicine, and fuel have remained relatively stable in comparison.

    That’s mainly due to them being subsidized at the official exchange rate of 1,507 LBP/1 USD.

    View this post on Instagram

    A post shared by wissam balaghi (@w_balaghi)

    But since Lebanon is practically drained of US dollars, the BDL will be forced to end this subsidy when whatever remains of its foreign currency reserves reach a certain level. This seems to be happening soon.

    An official source told Reuters that the central bank informed the government of its plan to end its support for the essential items in order to prevent the reserves from dropping below $17.5 billion.

    As of July, these reserves were close to $18 billion, according to recent estimations.

    View this post on Instagram

    A post shared by Lorenz Kohlhoff (@lorenz_kohlhoff)

    If the support for these commodities does end, then bread, gas, and medicinal drugs will be no different from the other items in the supermarkets in that their prices will skyrocket and fluctuate with the value of the Lebanese pound.

    The evolving economic crisis has already boosted unemployment rates and plunged more than half of the Lebanese population into abject poverty, with more people expected to fall into the pit in the coming months.

    With subsidy removed from the equation and the price of bread cut loose, how will these people and their families continue to survive through the miserable living conditions?

    Economic Crisis
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