Fuel prices in Lebanon are expected to double, after the government's decision on Saturday, August 21st, to raise the exchange rate used in the pricing of petroleum products in an effort to ease the acute shortage of fuel that has paralyzed the country.
The hike, which amounts to a partial reduction in fuel subsidies, means more hardship in a country where poverty has risen sharply following a two-year financial meltdown that wiped out 90% of the local currency's value.
The decision was taken at an emergency meeting attended by Lebanese President Michel Aoun , Central Bank of Lebanon Governor Riad Salameh and other officials to discuss the fuel crisis that has caused chaos in Lebanon and paralyzed basic services.
Despite the expected rise in prices, the decision will not raise the fuel pricing exchange rate completely to the level at which the Central Bank will finance the country's imports, a gap that the government will continue to bear at the present time.
Riad Salameh, governor of the Banque du Liban, told Reuters that the bank will provide dollars for fuel imports at the market price of 16,500 on Friday, which is slightly lower than the parallel market price, which hovers around 19,000, adding that the difference will be a loss that the government will bear.
A statement issued after the meeting said that the bank will open a temporary account with a maximum of $225 million until the end of September to cover the support.
The statement explained that the move aims to cover urgent and exceptional subsidies for gasoline, diesel and domestic gas.
This crisis is considered the worst collapse since the civil war that took place between 1975 and 1990, and the collapse reached a critical point as hospitals, bakeries and other basic services were forced to reduce or close their doors due to power outages with the loss of gasoline, which is almost impossible to find.
The Central Bank used its dollar reserves to finance fuel imports at the official exchange rates, which are much lower than the parallel market exchange rate for the dollar, which has depleted the reserves.
The central bank said earlier this month that it would no longer finance imports at subsidized rates, exacerbating the crisis.
The emergency meeting with Aoun and Salameh was attended by Caretaker Prime Minister Hassan Diab, Finance Minister Ghazi Wazni, and Energy and Water Minister Raymond Ghajar.
After the meeting, a statement was issued by the attendees, in which it stated, “Approval of the proposal of the Ministry of Finance to request the Bank of Lebanon to open a temporary account to cover urgent and exceptional support for fuels from gasoline, diesel, household gas, service providers and maintenance of electricity plants, which represents the value of the difference between the exchange rate of the US dollar according to the platform.” exchange” and the price approved in the price-installation table, which is set at 8000 Lebanese pounds.
The statement indicated that the Ministry of Energy and Water is scheduled to issue a price-fixing schedule as soon as this decision is issued.
According to Saturday’s decision, the official selling prices will now be based on the exchange rate of 8000 pounds to the dollar, which is still much lower than the unofficial parallel market price.