The sharp rise in prices of unsubsidized goods indicate the grave risks that will follow, with the Banque du Liban’s inability to continue supporting basic necessities, including fuel, food and medicine.
Detailed data collected by the Central Statistics Department showed that the prices of furniture, household appliances, and household maintenance rose by 664 percent annually at the end of August.
Costs in hotels and restaurants increased by more than 500 percent, while the prices of clothing and shoes rose by 413 percent, accompanied by a 367 percent increase in food prices. Tobacco prices also soared, with increases of more than 400 percent.
Estimates show that when subsidies are permanently lifted and dollar market price is applied on all goods, a huge shock will hit the Lebanese markets.
Around 80 percent of the country’s consumption needs are imported. This explains the soaring inflation rate as the dollar is valued in the parallel market at around LBP 9,000 compared to its official price of LBP 1,500.
The BDL has warned that it would stop subsidizing basic material as of January, due to the shrinking of its usable reserves of hard currencies to less than USD 3 billion.
Until now, the sharp waves of rising prices did not include vital areas of household spending, including housing, transportation, communications, and education.
BDL Governor Riad Salameh explicitly said that he had informed the government of the need to protect the compulsory reserves of banks in foreign currency for purposes of support. In a monthly meeting with the Association of Lebanese Banks, he noted that those reserves would allow him to support, for a period of two or three months, basic materials, especially fuel, wheat, and medicine at an exchange rate of LBP 1,500 and foodstuffs at an exchange rate of LBP 3900.
According to wholesalers, supermarket owners, stores, and pharmacies, the markets are still witnessing a remarkable demand from consumers to stockpile all kinds of subsidized materials such as flour, medicines, and basic foodstuffs, in anticipation of the soon lifting of subsidies.
Consumers deliberately stored gallons of gasoline, despite the extreme risk this entails.
The financial statements of the central bank’s budget confirm the huge depletion occurring in the stock of foreign currency reserves at the BDL.
According to the latest statistics, the value of BDL’s external assets decreased by 32.68 percent at the end of the third quarter this year, compared to the same period last year, which is equivalent to $12.29 billion.
