The End of $ 1515: The Post-Subsidy Disaster


An excerpt from Elie Ferzli’s article in Al-Akhbar:

Informed sources confirm that the debate is currently focused on getting out of the cloak of 1515 LBP credits, but not towards the market price, but towards the online platform price, that is, to 3900 LBP now. Saving 2400 pounds for every dollar secured by the Banque du Liban constitutes an outlet for it, but it eliminates any outlet for people. The worst is that this price is not fixed. In the event of further crashes in the exchange rate, the platform price is expected to rise. This means, in turn, the rise in the price of basic materials, which were supported by the official price, to nearly the current market price. However, this debate may become meaningless if the Central Bank of Lebanon declares that it no longer possesses dollars in the first place. There is then no substitute for the market price. This will lead to a serious social disaster. The Ministry of Energy, for example, conducted a study of the possibilities, which found that for the price of a barrel of oil of 50 dollars, the price of gasoline will reach 60 thousand, compared to 40 thousand for the price of a diesel fuel.

The biggest problem is the removal of subsidies on medicine or wheat. In the Central Council of the Banque du Liban, there is a discussion on the exclusion of medicine, but it has not been decided whether it is possible to keep its subsidies at the official price. For even if the Banque du Liban secured dollars at the price of 3900 rather than at the market price, the prices would lead to the inability of many groups to secure their medicine. There is no justification for the wheat bill to remove subsidies. The annual value of wheat imports does not exceed $ 150 million. Once again, however, the Banque du Liban uses a card, “I no longer have dollars.”

In practice, and after the discussion was settled not to prejudice the official exchange rate until the agreement with the International Monetary Fund, in a way that would not lead to a social and economic disaster, in the event that the Banque du Liban was unable to pump dollars into the market, the measures expected, from today until the end of the year, Confirm that changing the exchange rate has become a fait accompli. Basically, the official price was only applicable for imports of fuels, wheat and medicine, and for banking transactions. After canceling subsidies on these commodities, coupled with the decision requiring companies and expatriates to repay their loans in cash dollars or on the platform price, the price of 1515 would have vanished. It remains applicable only for individual loans. Incidentally, this measure ignores the fact that the Central Bank encouraged the operations of credit in dollars for many years, which resulted in the waste of 24 billion dollars, which is the value of loans in dollars, of which 5 billion, at the minimum, went abroad.

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