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Lebanon Rationalizes Subsidized Food Basket

Lebanon Rationalizes Subsidized Food Basket

Tuesday, 24 November, 2020 - 10:15
Customers shop at a supermarket in Beirut, Lebanon January 24, 2020. (Reuters)

Lebanon’s Ministry of Economy announced it would rationalize the food basket by reducing the number of subsidized commodities by 55 to 60 percent, which means reducing its cost from USD 210 million a month to less than USD 100 million.

According to the ministry, the step would contribute to prolonging the period of support for additional months, especially with the diminishing reserves of the Central Bank in foreign currencies.

“Theoretically, the rationing of subsidies should affect the citizen directly, but in practice the situation will remain the same,” said a grocery store owner in Beirut.

He told Asharq Al-Awsat that subsidized goods were not originally present in the market in sufficient quantities, so people in most cases bought the goods at an unsubsidized pricing based on the dollar exchange rate on the black market.

“The difference between the subsidized and unsubsidized commodity was not large, and in most cases it did not exceed LBP 2,000 ($1.33 according to the official exchange rate and approximately 20 cents on the dollar price in the black market),” a Beirut resident told Asharq Al-Awsat.

The Ministry of Economy had launched the so-called subsidized food basket last July, with the aim of curbing the rise of prices amid a scarcity of foreign currencies that Lebanon needs for its imports.

The basket included - before rationalization - 30 basic foodstuffs, in addition to 270 commodities classified as raw materials used in manufacturing.

Since its launch, the food basket was widely criticized, especially as it did not help to reducing commodity prices, as repeatedly shown by the price index.

Last week, the ministry referred two companies to the Public Prosecution Office, as their subsidized products were seen on the shelves of supermarkets outside Lebanon, which raised concern about illegal smuggling.

“The smuggling of subsidized goods and selling them abroad brings big profits in fresh dollars to the merchants,” said Zuhair Berro, the head of the Consumer Protection Association.

“Smuggling is not the only way of manipulation,” he added, noting that some merchants “store the subsidized goods to later sell them when the subsidies are lifted, so they make enormous illegal profits.”

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