The government believes in its project that providing subsidies in dollars would control inflation and limit the rise in the exchange rate (the cost of the card is one billion and 235 million dollars, equivalent to 14.4 trillion pounds over the price of 12,500 pounds to the dollar). However, this hypothesis fails to indicate that the demand for dollars will not stop, and that importers will continue to obtain their need of dollars from the market (about 6 billion dollars was the value of imports not supported by the Central Bank). Of course, the central bank will not be able to control the exchange rate unless it intervenes to introduce the dollar. Does it have the ability to do so? Is it possible for him to intervene using the existing funds in what he calls “reserves”? And if he could do so, why lifted the subsidies in the first place?
Concerned sources see that the actual reserve does not exceed 10 billion dollars (to be added to the value of loans provided to banks). Therefore, they ask: Does the Governor of the Banque du Liban want a patent instrument for his compulsory reserve disbursement that he imposed himself on banks? Or does he want from raising subsidies to raise prices significantly, leading to the inability of people to buy, and thus reducing the demand for dollars?
It is no longer a secret for anyone that the economic downturn will not end for years, but the card has a limited duration of one year. Can anyone imagine what will happen after this year? Will the subsidy stop causing a social explosion, or will the government increase wages and secure jobs? Is it possible then to imagine the minimum wage close to five million pounds? Because that seems impossible, there is no substitute for the social wage, which in this case is subsidized goods.
Reducing drug subsidies threatens Social Security with bankruptcy
The bigger problem is estimating numbers in the project. Countless meetings were held, with the result being numbers that were irrelevant to the actual cost of living. Talking about replacing fuel and food subsidies with the card ignores a basic factor, which is that canceling subsidies on basic materials does not affect the consumption of these materials exclusively, but rather affects all production costs and the cost of all basic services, from housing to medicine, hospitalization and education. .
Gasoline subsidies, for example, were decided based on the average consumption of a household of 4.2 people, which is 5.3 tanks per month. How is this amount calculated? And what if the employee lives outside the capital and works inside it, does he really only need 5 cans of petrol per month? Then, can the card really compensate for the increase in the price of the plate from 39,500 to 123 thousand pounds? For example, it suffices to point out that the gallon of water that most families buy, due to the lack of drinking water, its pricing depends mainly on the cost of transportation and energy. And this gallon increased its price before reducing the subsidy to about 10 thousand, so is it possible that it would reach 20 or 30 thousand?
The food basket is estimated at 430 thousand pounds per month, and this cost is calculated from the total amount available in the card? However, does a family of 5 really need this amount just to provide their basic food? Has any of the authors of these estimates recently visited the supermarket? And did anyone read the study prepared by the Crisis Observatory at the American University, in which it was found that the cost of fattoush during the month of Ramadan reaches 555 thousand pounds?
Then how does the project indicate that the cost of subscribing to the generator for the five ampere will rise to 122 thousand pounds if the subsidy is completely removed, while it is currently exceeding 150 thousand pounds? Doesn’t that mean that the cost, after the subsidy is raised or reduced, may reach 500,000 pounds and even one million?
The proposal also provides for reducing drug subsidies by 54 percent (from $ 1,296 billion to $ 598 million), to limit it to medicines for severe and chronic diseases. The project authors forget that most medicines are bought without a prescription. Is it possible then for the head of the family to pay 100,000 liras or 200,000 liras for a cough or infection medicine, for example? Does the project take into account the status of social security? Would he not be threatened with bankruptcy due to the high price of medicine and the cost of hospitalization?
The foregoing indicates that canceling or “reducing” the subsidy and providing the financing card as an alternative to it, if it is not accompanied by measures to restore the economy, will be a recipe for destroying what is left of the ability to live in Lebanon. As for the argument of low reserve requirements, it is not sufficient to justify striking people’s social safety. Unemployment indicators indicate 400 thousand unemployed people, and therefore the need for 5 million pounds to secure the cost of living for people means that the entire society will shift below the poverty line.
All of this is taking place under the pretext of combating smuggling and benefiting the unworthy from subsidies. Simply put, is the government able to starve people but unable to fight smuggling? Had the intention really been there, the smuggling would have been greatly reduced. Then those who said that this smuggling is due exclusively to the low prices in Lebanon. The primary justification for smuggling is the sanctions on Syria, and this means that the need for goods will not stop even if prices rise. As for benefiting the unworthy, it does not need much to be addressed. Tax systems arose on the basis that people are equal before the law. Therefore, according to their income, they pay taxes to finance this equality. If that had happened, it would have been normal for the rich and the poor to benefit from subsidies. For example, what is the justification today for not raising electricity prices to the upper levels? The argument for waiting for electricity to turn 24 by 24 collapsed in turn with the Great Crash.
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