As
Lebanon’s hard currency reserves dropped alarmingly last
year, its subsidy program expanded to include cocoa powder,
cashew nuts, and
saffron.
اضافة اعلان
The move was designed to support local producers who either
made the goods or used them as ingredients, and to complement price support for
core items like fuel and wheat aimed at ordinary people caught up in a
spiraling financial crisis.
But for critics of the government, the additions were a sign
of a bloated and poorly managed subsidy system that did not always reach the
people it was meant to, encouraged smuggling and wasted precious reserves.
“Subsidies should be to subsidize basic things, not an
entire industry,” Hani Bohsali, head of the Syndicate of Importers of
Foodstuffs, Consumer Products, and Drinks, said of the expanded list.
“Do you really need to subsidize cocoa powder and
cake-making?”
Around 300 items such as cashew nuts and canned mushrooms
were added. The list has now been reduced to around 150 items — still far too
many, according to Bohsali.
Asked why so many goods were still on the list, caretaker
economy minister Raoul Nehme told Reuters that the government had hoped to move
quickly to a new program directly subsidizing families with cash.
He also said that any subsidy system was open to smuggling,
and that when it was introduced a year ago it was only meant to last a few
months.
Lebanon, which is in political paralysis, deeply indebted
and struggling to raise funds from potential donor states and institutions,
spends about $6 billion a year on subsidies.
Central bank reserves stood at just over $15 billion in
March, compared with more than $30 billion before the economic crisis hit in
2019. The central bank did not give more recent figures.
The caretaker government has said money for subsidies could
run out as soon as the end of May, in what would be a major blow to a
population more than a half of which lives in poverty.
Caretaker energy minister Raymond Ghajar warned that Lebanon
could be plunged into darkness and the head of the pharmacists’ syndicate said
the country was running short of medicine.
Government seeks change
Under the current system, the central bank provides hard
currency to importers at the old currency peg of 1,515 Lebanese pounds to the
dollar for fuel, wheat, and medicine, and at 3,900 to the dollar for a basket
of basic items.
With reserves depleted, the government has said subsidies
needed reining in, but it has stopped short of ending them until an alternative
cash subsidy system is approved by parliament.
Meanwhile, some of those who most need access to cheap goods
struggle to get it. A regulation that stipulates subsidized food items go
straight from importer to retailer, for example, can cut out wholesalers who
reach smaller outlets and remote areas.
Shoppers can buy expensive French butter at a fifth of its
value at upscale Beirut supermarkets, while others are left brawling over
subsidized cooking oil elsewhere.
Items with Lebanese subsidy stickers have also shown up in
far-flung markets in Europe and Africa.
“From Africa with love” one twitter user wrote with an image
of subsidized coffee showing up in her local store in Benin.
Smuggling on a larger scale involves more basic items,
including livestock, wheat, and fuel.
Fuel leaks into Syria
Hatem Aboualshra, a livestock trader in the northern city of
Tripoli, said big profits could be made by purchasing animals from abroad with
subsidized dollars and then smuggling them to a third country illegally at a
healthy profit.
Sheep imported from Armenia for around $100 a head, for
example, can sell in the Gulf at over $200, he added.
“If they just stop this subsidy the meat will become cheaper
because the original traders will start normal work again.”
By far the biggest outlay for the government is subsidies on
fuel, which account for around half of the annual bill, or $3 billion.
Many petrol stations are closed because they have nothing to
sell, and those that are open attract long queues of cars.
“In all of Beirut I couldn’t find any gas stations ... this
is the first one I find that is working,” said Mohamed Maktabi, an engineer
back home from abroad for the recent Muslim Eid Al-Fitr holidays. He had been
waiting more than 20 minutes in line.
Minister Ghajar said in mid-April that fuel smuggling into
neighboring Syria, where it can be sold for 10 times the price, was the main
reason for shortages.
Small villages like Al-Qasr, in Lebanon’s Baalbek and Hermel
region on the border with Syria, are ideally located for the illicit trade.
Villagers living meters from Syria move freely between
checkpoints, and small fuel containers are carried on scooters across the
border for profit.
A Lebanese army officer involved in patrolling the border
said fuel and wheat were being smuggled into Syria, along with clothes,
cigarettes, and other food items.
“We have managed to stop a large portion of this,” added the
officer.
The army has set up checkpoints and surveillance towers on
top of the eastern mountains that separate the two countries.
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