The subsidy rationalization file is now ready for the government, awaiting it to be sent to the parliament for approval.
The subsidy rationalization file is now ready for the government, awaiting it to be sent to the parliament for approval. The percentage of subsidy removal differs for each commodity. With the partial increase, the food basket that costs the Central Bank of Lebanon $ 65 million a month will stop permanently, meaning that there will be no subsidized goods in the supermarkets that require fights for them, and thus the prices of all commodities will be at the exchange rate of the black market dollar. The subsidies for medicine and fuel will also make a difference in the prices. We display a sample of some basic commodity prices after the subsidy rationalization, and we present a reading on financing the financing card.
Based on the prices of the food basket in the Ministry of Economy in the supermarket during the month of April 2021, experts estimate that the prices of commodities will increase about three times, so that some of them are as follows:
– A pack of 700 grams of salt at about 7,500 pounds before the subsidy rationing, it will turn out to be about 22,500 pounds.
– A box of tea weighing 454 grams at about 38,000 pounds before the subsidy rationing, it will be at 114,000 pounds.
– A bag of milk weighing 2.5 kilograms at about 57,000 pounds before rationing the subsidy, it will become at 171,000 pounds.
A kilo of lentils is about 15,000 liras before the subsidy rationing, it will become about 45,000 liras.
A kilo of regular rice is about 7,000 liras, before the subsidy rationing, it will be 21,000 liras.
A kilo of chickpeas will be about 21,000 liras before the subsidy rationing, it will be 63,000 liras.
A kilo of sugar will be about 9,000 liras before the subsidy rationing, it will be 27,000 liras.
– 3.5 liters of oil at about 106,000 liras before the subsidy rationing will be 318,000 liras.
A pack of butter, which gave 33,000 pounds before the subsidy rationing, will become 99,000 pounds.
A can of 200 grams of ground coffee at about 8,500 pounds before the subsidy rationing, it will become 25,500 pounds.
A carton of 70 grams of tomatoes, at about 4000 liras, before rationing of subsidies will be 12,000 liras.
A 500-gram packet of pasta at about 5,000 pounds before the subsidy rationing will be at 15,000 pounds.
As for a bundle of bread, its price will not change, because the flour subsidy will continue annually at $ 150 million, and the cost of this support does not cost the state a large sum.
As for medicines, subsidies will be halved, with the exception of essential, intractable, cancerous and chronic medicines, in addition to infant formula and vaccines. In doing so, the prices of over-the-counter and non-chronic health medicines, that is, regular medicines, will increase. So, a headache reliever, for example, will cost about 25,000 pounds, after it was about 5,000 pounds.
With regard to hydrocarbons and gas, the state will subsidize only 15% of its price, while it used to subsidize 85%, and its prices will be as follows:
– The gasoline plate before the subsidy rationing is 39,000 liras, it will be between 125 and 130,000 liras.
The diesel fuel plate before the subsidy rationing is 27,000 liras, it will be 108,000 liras.
– The gas bottle before the subsidy rationing is 25,000 liras, it will be 110,000 liras.
No one has the right to harm the depositors’ funds for support
Commenting on these numbers and on the possibility of financing the financing card from the compulsory reserve, the economic researcher at “International Information”, Muhammad Shams al-Din, explains, in an interview with Al-Nahar, that “the financing card is an unnecessary necessity, because it is supposed to support the lira instead of supporting Goods that only smugglers and merchants benefited from, and deposits in dollars should be returned to their owners instead of wasting the depositors ’money on subsidies.
Shams El Din explains that if the concerned parties insist on completing the error they started about a year ago, and external financing is secured for the financing card, this will be a better and good solution. If this financing is not available, and those concerned decide to finance the card in lira, then the Banque du Liban will sell more pounds, and that inflation will increase, and the poor will be the first to be affected by this card, because the prices will rise dramatically. In this context, even the classes that are not currently included in the targeted categories of the financing card, the rise in prices will make them poor and need a financing card, and “we will face a catastrophe and a complete collapse.”
As for proposing its financing from the Banque du Liban in dollars, it calls for the question, according to Shams al-Din: “Neither the state nor the Banque du Liban has the right to continue subsidizing the people’s money, and if they intend to pay the card in dollars, then why do they not pay people their money directly in dollars instead of the financing card formula. This option is the best and safest, thus creating liquidity in the market. “
Stopping the injection of liquidity in pounds, after the Central Bank printed about 26 thousand billion pounds during the last period, and providing liquidity in dollars, lead to a decrease in the price of the dollar in the market, and we will not need support. And the poor citizen who does not have a dollar account will not need support or a financing card, because prices will definitely decrease. With the reported existence of about $ 15 billion in mandatory reserves at the Central Bank of Lebanon, he can thus stop the subsidy. Instead of providing the financing or ration card, he saves each depositor 0.5% of his deposit, with a minimum of $ 500 and a maximum of $ 4,000 per month, the researcher suggests.
According to Shams al-Din, “We are faced with the reality that subsidies must stop and deposits must return to depositors in dollars. There is no rule requiring that the compulsory reserve ratio in the Central Bank be 15%. During the era of the late President Omar Karami, the existing reserves were only $ 500 million. Therefore, there is no justification for sticking to the 15%. Rather, 3 to 4 billion dollars should be pumped into the market by returning them to their owners. “
In his view, if the Banque du Liban pumped $ 500 million a month to partially return depositors’ money over a period of three months, we would witness a dramatic decline in the dollar’s exchange rate. Instead of paying $ 100 million a month to the financing card, let us pay $ 200 or $ 300 million and pay people’s money instead of squandering it.