Lebanon: Central Bank stops fuel import subsidy

Lebanon’s Central Bank has said that it has stopped providing US dollars for petrol imports, Reuters has reported. The move has caused prices to soar and increased pressure on the local currency, which has been losing value steadily.

Although the bank had said last year that it would stop providing dollars at heavily-subsidised exchange rates due to dwindling foreign currency reserves, it continued to do so at a rate below market prices on its Sayrafa exchange platform.

A spokesperson for the bank said that fuel importers will now have to source US dollars from the black market, where the Lebanese currency was trading at around 35,000 pounds to the dollar on Monday. The Sayrafa rate sat at around 28,000 last week.

“If there is more volatility in the exchange rate there will be more volatility in the fuel price,” a member of the Association of Petroleum Importing Companies, Maroun Chammas, told Reuters.

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The price for 20 litres of petrol jumped by 20,000 pounds on Monday, a significant increase compared with regular daily fluctuations of a few thousand pounds in the weeks prior.

According to Chammas, importers have so far been able to source all the dollars they need from the black market. Petrol retailers will continue to accept payment in Lebanese pounds at the daily black market rate, he added.

Lebanon has been experiencing its worst economic crisis since the end of the 1975-1990 civil war, which has led to financial collapse.