Two scenarios for raising subsidies … the dollar to 25 thousand pounds?

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Khaled Abu Shakra wrote in Nidaa al-Watan: “In light of the government’s“ sterility ”in presenting a clear plan to lift the subsidy, the way opens for two scenarios, not a third of them. The first is to rationalize support based on the informal proposals made by the concerned sectors, namely: derivatives Subsidized oil by 90 percent at the exchange rate of 1515. Subsidized medicines by 85 percent at the exchange rate of 1515. Wheat and flour subsidized by 90 percent at the exchange rate of 1515. And subsidized foodstuffs by 85 percent at the price of 3,900 pounds. The second scenario is Completely lifting subsidies, and expanding citizens’ benefit from direct material aid, whether from international loans or even government contributions.

Partial lifting
The first scenario assumes a reduction of subsidies on gasoline by 40 percent, and the remaining 60 percent are to be secured from the Central Bank of Lebanon at the price of 3,900 pounds instead of 1515, while keeping the diesel subsidy as it is. Regarding the “fuel” for the necessity of the EDL, which costs about $ 1.7 billion annually, nothing is clear so far. As for medicine, the trend is to support the import of raw materials that enter the national pharmaceutical industry by 100 percent, provided that the subsidy remains the same for chronic disease drugs that require a prescription, that is, the Banque du Liban secures 85% of the import value based on the price Spending 1,500 pounds, and in return reduces the subsidy on the rest of the over-the-counter medicines, which are called OTC (purchase through the counters), so that their import becomes based on the price of the platform, i.e. 3900 liras. As for the flour subsidy for making the loaf, it will not be raised, as its total monthly cost does not exceed 12 million dollars. As for foodstuffs imported by 85% on the basis of 3,900, they will return to the first basket, i.e. subsidizing only 30 commodities at a cost not exceeding $ 80 million per month.

This scenario reduces the monthly subsidy bill from the current $ 500 million to about 266 million, distributed as follows: $ 80 million for food, 58 million for medicine, 12 million for flour, 83 million for diesel, and $ 33 million for gasoline. Without including the fuel subsidies for Lebanon’s electricity. At this level, the demand for dollars on the parallel market will increase at a rate of 243 million dollars per month (500-266), or the equivalent of 8 million dollars a day; In other words, the daily demand will double and “double” with it the exchange rate, and it may reach 25 thousand pounds.
Total lift
The second scenario assumes the total removal of subsidies. This means that demand of $ 500 million per month or $ 16 million per day will shift to the parallel market. This theoretically raises the exchange rate to between 36 and 40 thousand pounds, but in practice there is no longer a ceiling for the exchange rate, especially in light of the tremendous lack of supply and the demand for dollars turns into a “public auction, whoever pays more gets it,” as described by a union member Station owners George Brax. ”
On the other hand, however, the head of the Food Importers Syndicate, Hani Bohsali, believes that “replacing the subsidies with direct financing cards would cause two influencing shocks: The first is stopping smuggling due to the convergence of commodity prices between Lebanon and the countries smuggled to it, specifically Syria. The second is that the waste in consumption has decreased dramatically and stopped Storage operations at merchants and individuals. ”





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