Warning of “Disaster” as Lebanese Officials Withdraw Fuel Aid Business and Economic News

Beirut, Lebanon – Interim Prime Minister Hasan Diab has approved a plan to reduce key fuel subsidies, observers have warned that a “social catastrophe” could be unleashed as long as the economy continues to deteriorate.

Diab said the goal was to get enough fuel throughout the summer, and there he hoped outsiders and tourists would visit the money-covered country.

It would import fuel from Lebanon at 3,900 pounds to the dollar, rather than 1,500. A minister source told Al Jazeera that the price of a petrol tank could almost double.

The decision was taken last week after a meeting with President Michel Aoun, Riad Salameh, central bank governor, interim Energy Minister Raymond Ghajar and interim Minister Ghazi Wazni at Baabda Palace.

Economist Jad Chaaban and a professor at the University of Beirut told Al Jazeera that there is a high risk of withdrawing funding at this time. Not only does it make life worse protesters have blocked roads all over the country because they fear having to live in even harsher economic conditions.

“If you double the price [of gasoline and fuel] then you double the price of all the products and services they need, “the economist said, fearing further tensions.” It’s a national security issue now. “

Banknote program

Diab, who appeared to oppose the removal of the grants without a replacement program, was not present at the meeting at Baabda Palace.

Government sources told Al Jazeera that he initially spoke out against the policy of reimbursing subsidies, but changed his mind after a joint parliamentary committee approved a bill for a money card program on Thursday. The banknotes would replace the country’s expensive subsidies for wheat, fuel and medicine.

Lebanon’s continued decline in the pound has hit an all-time low of $ 16,000.

Lebanon has been without a full government for almost 11 months, and half of the population is still recovering from the economic crisis that has led to poverty.

Energy Minister Ghajar has warned that fuel subsidies will soon be implemented soon.

“Those who cannot afford the £ 200,000 deposit in Lebanon should stop using the car and use something else,” he said after the parliamentary meeting. A government source told Al Jazeera that gasoline prices will not rise as much as the minister claimed.

A few Lebanese importers and distributors rely on subsidies from central banks to import fuel into the U.S. currency, which costs about $ 3 billion a year.

The country affected by the crisis also subsidizes wheat, medicine and some food, and costs a total of another $ 3 billion annually. Officials have warned that this program is no longer sustainable, leaving approximately $ 14 billion left by the central bank.

However, rising world prices have led to fuel shortages and rising prices. Drivers ’panic waits for long hours to partially fill the cars, as fuel stations are facilitating their supply. The Lebanese army and security forces frequently intervened to break up the clashes and sometimes even to conduct armed confrontations.

‘Social disaster’

International organizations and economists have criticized the effectiveness of the program.

The International Labor Organization and UNICEF estimate that 80% of grants benefit 50% of the richest people in the country, as they have greater purchasing power. Smugglers have also benefited from the program by selling subsidized goods for greater profit outside the country, especially in neighboring Syria.

But at the same time, the United Nations warned that the removal of subsidies could lead to a “social catastrophe” because Lebanon lacks viable social security networks and effective public services. There is already a shortage of medicines in the country and it barely keeps the light on.

Chaaban said the solution ultimately lies in breaking the political impasse and forming an entire government that can make the economy viable again with international money injections.

And until then, despite its ineffectiveness and even running out of money, Chaaban said the grant program cannot be removed.

“No country uses central bank money to finance imports, but in our situation we have no choice.”