Lebanese face catastrophe as money for state subsidies nears end

“If the government stops its so-called support for basic goods, about 80% of the Lebanese population will be in poverty within a few months.”

Zainab Sharaf al-Deen, 18, is seen holding a placard alongside others at an anti-government protest in Beirut, Lebanon, on October 22, 2019. (photo credit: ALKIS KONSTANTINIDIS / REUTERS)
Zainab Sharaf al-Deen, 18, is seen holding a placard alongside others at an anti-government protest in Beirut, Lebanon, on October 22, 2019.
Demonstrators stormed through the streets of Beirut, amid fears that state subsidies of fuel, medicine and wheat flour will soon end. The protest took place on Tuesday, following warnings from United Nations agencies of possible social calamity in Lebanon.
“Support for some basic items cannot continue after the next two months,” Bank of Lebanon Gov. Riad Salamé said on December 1.
The Lebanese pound has continued to drop in value during the country’s prolonged economic crisis. Dozens of protesters also tried to reach the Lebanese parliament building on Monday, while others went to the government headquarters and to the Economy and Trade Ministry, burning tires and blocking roads.
Jassem Ajaka, a professor of economics at the Lebanese University, told The Media Line that the central bank has not been directly subsidizing goods, but rather provides dollars to suppliers at the far-below-market official exchange rate of 1,507.5 Lebanese pounds to import certain goods such as flour, medicine and fuel, and to pay for internet services.
Ajaka added that other foodstuffs have been imported at the rate of some 3,900 Lebanese pounds per dollar. “Therefore, any lifting to the so-called support for basic goods is in fact a complete liberalization of the Lebanese pound exchange rate, where imports currently cost the central bank $700 million a month.”
When the government decided to subsidize the so-called basic goods, it did so to avoid a social revolution given the low value of the Lebanese pound on the black market, “but the decision was taken without a clear mechanism for the support of these goods. There were wrong decisions which burned a lot of dollars for nothing,” he said.
The main issue remains the smuggling of these subsidized goods for sale abroad, in Kuwait, Turkey, Syria and other countries, Ajaka said.
“Everything is being smuggled out of the country. One time, a deputy told me during an interview on NBN [the Amal movement’s National Broadcasting Network] that some of these supported goods never even enter Lebanon, as they go directly from where they’re purchased to somewhere else for sale. It’s a scandal,” he said.
Ajaka said that the control mechanisms do not rise to the required level, in part because of a “certain mafia” that unfortunately can influence political decision-making in the country.
“If the government stops its so-called support for basic goods, about 80% of the Lebanese population will be in poverty within a few months,” he said.
Last March, Beirut defaulted on a $1.2 billion eurobond, the first failure to repay sovereign debt in the state’s history.
Ordinary Lebanese also have been suffering from a suffocating dollar liquidity crisis, one of the factors beyond the ongoing October Revolution (so called because it began in October 2019) street protests against sectarian rule, economic stagnation and government corruption.
“The impact on the country’s most vulnerable families of eliminating price subsidies will be enormous. Yet there is almost nothing to help mitigate the impact of it,” Yukie Mokuo, the representative of the United Nations Children’s Fund in Lebanon, and Ruba Jaradat, the Beirut-based regional director for Arab states of the UN’s International Labor Organization, wrote in a joint opinion piece published on Monday.
According to Mokuo and Jaradat, a rough analysis shows that up to 80% of subsidies benefit the richest half of the population, and only 20% goes to the poorest half.
Rawaf Sulaiman, a teacher now based in Lebanon’s Bekaa Governorate, told The Media Line she used to make about $2,000 a month by working in two schools, but now she has a job at one school, making less than $120.
“Now I can’t buy medicine even if it was available. If the government stops its support for bread, I won’t be able to eat,” she said.
Sulaiman, who had to move from the capital to a less expensive area, said that because of the novel coronavirus, naturally there is nothing to do in her spare time, and that even charging her phone and buying fuel is difficult now.
“I get so many calls from people who were suffering financially already before the October Revolution, crying for help. They are asking for shampoo, oil. They ask only for basic things,” she said.
There were already shortages of medicine, she continued.
“People have reached a point of depression; they are taking tranquilizers. If we eat today, we are not sure we can eat tomorrow,” Sulaiman said. “If the government lifts its support on fuel, I won’t be able to go to work given what I make now, and what I’m making now can’t even pay for my medicine.”
Abd Joumaa, who lives in the Beirut area, told The Media Line that there is confusion regarding government decisions on dealing with the crisis, including officials who said different things about the same topic.
“For instance, regarding ending support for flour, the representative of the bakery owners spoke about the decision and the increase of prices, which means that he’s sure and knows official information, especially since he’s a relative of an official,” Joumaa explained. “The next day, official information confirms that the decision wasn’t made yet. A huge confusion.”
The situation in the country is terrifying as things were go from bad to worse, and the central bank’s monetary reserves are running out amid a lack of solutions, he said.
“The protests are limited to a small number of people, which is weird, as if people have become numb or something. They are in shock or in a coma,” Joumaa said.
People’s purchasing power will drop if subsidies are dropped, especially as pensions, paid in Lebanese currency, will remain the same, he also said.
“As an employee, I buy a sandwich on the street every day. If they end support for flour, I might be able to buy a sandwich every four days based on what I make. Ninety percent of our salaries go for food,” Joumaa explained.
He added that he has not been able to buy clothes since the October Revolution began.
“I’ve only bought one garment as I can no longer afford them. And if they end support for fuel, I won’t be able to buy fuel but once a week. Some people stopped using their cars and are using public transportation since they can’t afford the car expenses,” Joumaa said.
In another blow to the desperate middle class, private universities have been raising the cost of tuition.
On Tuesday, the American University of Beirut (AUB) raised its tuition fees, adopting a dollar exchange rate of 3,900 Lebanese pounds, while the official exchange rate is still 1,515 Lebanese pounds. This has created great confusion among students in light of the deterioration of economic and living conditions and the rising unemployment rate.
Amar Sleiman, 22, a medical student at the University of Balamand (UOB) in the North Governorate, told The Media Line that the rise in universities’ tuition has affected all students in Lebanon.
“At AUB, medicine school [tuition] has increased from 63 million to 160 million LBP [Lebanese pounds]. At UOB, what a medical student was supposed to pay over three years, he will have to pay for only one year,” she said.
The increase in costs has made it impossible for many students to enroll, especially since salaries have remained the same, Sleiman said. “A student will now have to pay 12 million LBP [about $7,900] per month, where saving such a sum amid an economic crisis is impossible,” she said.
“Sadly, many of my friends at other universities decided to stop attending school; others are waiting to see if they can travel somewhere [abroad]. Every student in Lebanon is stressed, anxious and unmotivated,” Sleiman added.
She pointed out that online education is adding to students’ stress, with its many challenges in terms of internet connections and the lack of preparations.
“This year private universities will suffer a massive drop in applications, because they are not being clear with students; students will not risk it,” Sleiman said.
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