Reuters: Lebanon will slash commodity subsidies as foreign exchange reserves dwindle

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An official source told Reuters that Lebanon has about $ 1.8 billion in its foreign exchange reserves that could be made available to support basic food imports and other imports, but it may preserve their survival for about another six months by canceling subsidies on some commodities.
Lebanon, which is suffering under a heavy debt burden, is facing its most severe economic crises since the 1975-1990 civil war, which affected the local currency and caused prices to rise. Many Lebanese have fallen into poverty and become more dependent on subsidized food.
The reduction in subsidies heralds an increase in popular anger in a country ravaged by protests, as the crisis erupted in 2019.
Central Bank Governor Riad Salameh, who declined to comment for this report, says subsidies will have to be stopped once the mandatory foreign exchange reserves limit is reached, without indicating a timeframe.
The official source told Reuters that the reserves, which amounted to $ 1.8 billion, could be maintained for another year for months by cutting subsidies for a range of commodities such as cashews and vitamins.
The source did not give a detailed list.
In light of the depletion of dollar resources, the Central Bank provided foreign cash for imports of fuel, wheat and medicine at an official price pegged at 1,507.5 Lebanese pounds to the dollar, which is much lower than the traded price, which dealers say reached about 8,700 today, Thursday.
A list of around 300 other food and basic commodities is subsidized at 3,900.
In August, Salameh told Reuters that the central bank’s foreign exchange reserves amounted to 19.5 billion
Dollars, the mandatory reserve limit is $ 17.5 billion.
Some analysts say that the central bank’s reserves may in fact be lower than previously announced figures due to incurring losses in light of the foreign exchange crisis.
Nafez Sawouk, chief economist and emerging market analyst at Oxford Economics, said, “We realized during this entire year that reserves are eventually depleting, and no steps have yet been taken to create a social safety net.”

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