Source: Lebanon to Cut Commodity Subsidies Amid Declining Foreign Exchange Reserves

An official source told the “Reuters” news agency that Lebanon has around $ 1.8 billion in foreign exchange reserves that could be available to support imports of staple foods and other imports.
Lebanon, which suffers from a heavy debt burden, is facing its most severe economic crisis since the 1975-1990 civil war, which affected the local currency and caused prices to rise. Many Lebanese have fallen into poverty and have become more dependent on subsidized food.
The reduction in subsidies heralds a surge in popular anger in a country that has been ravaged by protests since the fall of 2019.
Lebanon’s Central Bank Governor Riad Salameh, who declined to comment on this report, says the subsidy should stop as soon as the mandatory limit on foreign exchange reserves is reached, without indicating a deadline.
The official source told “Reuters” that the reserves that are still available, which amount to 1.8 billion dollars, can be maintained for another six months by reducing subsidies for a group of basic products such as vitamins. The source did not provide a detailed list.
In light of the depletion of the dollar, the Central Bank provided foreign cash for imports of fuel, wheat and medicine at an official price set at 1507.5 Lebanese pounds per dollar, which is much lower than the current price, which according to the traders hit 8,700 pounds today (Thursday).
A list of around 300 other food and staples is subsidized at 3,900.
Last August, Salameh told “Reuters” that the central bank’s foreign exchange reserves amounted to $ 19.5 billion and the mandatory limit for reserves was $ 17.5 billion.
Some analysts say the bank’s reserves may in fact be lower than previously announced figures due to incurring losses in light of the currency crisis.
“We realized this year that reserves are eventually running out, and no steps have yet been taken to create a social safety net,” said Nafez Sawouk, chief economist and emerging markets analyst at Oxford Economics.