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In an interview with Bloomberg TV, Wazni said that the Central Bank has $ 16 billion remaining in foreign reserves, of which only $ 1 billion to $ 1.5 billion can be used to fund support, which is enough for a period of two to three months. , which is a reduction in half from $ 30 billion a year ago, according to Bloomberg, and seen by Al-Arabiya.net.
And he considered that “Lebanon can no longer continue with the same rhythm of support” without giving a deadline for changes, pointing to the cost of support of $ 500 million per month, equivalent to $ 6 billion per year. For this reason, the government has made the decision to rationalize the subsidies and reduce them in some areas ”.
Based on my weight, the government will remove some products, including cashews and some brand name coffees, from the subsidy list, in part because they have been smuggled abroad for profit. It also plans to gradually increase prices at gas stations in the coming months and reduce gasoline subsidies from 90% to 85%.
Wazni confirmed that subsidies for wheat, drugs and fuel to generate electricity are still in effect today.
He said: “The decision was made to remove subsidies from the food basket.” “The decision that must be made in the coming weeks is gasoline. Last month, during the confinement, we had the same consumption so we think something is wrong,” he said.
Wazni admitted that the measures will boost inflation, which is expected to be 77% this year.
The Lebanese Finance Minister went on to say that the government still plans to devalue the currency as part of the transition to a flexible exchange rate, but will not take this step without an economic reform program and support from the International Monetary Fund to help restore the trust. and consolidate the currency.
“We are going for a flexible exchange rate, but we need the IMF program,” he said.
Lebanon’s GDP contracted 25% last year. Wazni said prospects for 2021 depend on when politicians agree to a government and getting foreign aid. Without progress, he said, the economy would contract by as much as 10%. In the best of cases, he said, real GDP would shrink between 2% and 5%.
The budget deficit is expected to narrow to around 4% of GDP, from 6% last year and 11% in 2019, largely due to the default and cancellation of almost half of local currency debt in central bank power.
The draft budget does not foresee any increase in income tax or value added tax. Instead, my weighting proposes a 1% tax on bank deposits over $ 1 million and a 10% to 30% tax on the interest banks earn on deposits with the central bank.
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