New Lebanon cabinet lifts petrol price, signs audit deal
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[September 17, 2021] By
Maha El Dahan
BEIRUT (Reuters) -Lebanon's new government
raised gasoline prices on Friday, cutting a subsidy that Prime Minister
Najib Mikati has said is unaffordable as he advances plans to address a
devastating financial collapse.
The government also signed a new contract with restructuring consultancy
Alvarez & Marsal (A&M) to carry out a forensic audit of the central
bank, a step sought by donors who want to see Beirut enact reforms to
unlock badly needed aid.
The Mikati government, which took office a week ago, has promised action
https://www.reuters.com/world/middle-east/exclusive-lebanon-resume-imf-talks-begin-reforms-draft-policy-statement-says-2021-09-15
to address the crisis, including talks with the International Monetary
Fund (IMF) and a start to reforms.
IMF spokesman Gerry Rice said on Thursday there had been courtesy calls
with members of the new government and the Fund stood ready to engage in
the period ahead. Talks between the previous government and the IMF
broke down https://www.reuters.com/world/middle-east/lebanons-mikati-faces-tricky-path-safe-economic-ground-2021-09-13
last year.
The World Bank says Lebanon's economic collapse is one of the worst
https://www.reuters.com/world/middle-east/how-bad-is-crisis-lebanon-2021-09-10on
record.
The currency has slumped more than 90% since 2019, more than three
quarters of the population have been driven into poverty, the banking
system is paralysed and a hard currency crunch has led to shortages of
vital imports, including fuel.
Lebanon has been suppressing fuel prices by providing dollars at
subsidised exchange rates well below the pound's price on the parallel
market, with the stated aim of shielding people hit by the collapse.
Critics say the system has given rise to smuggling and hoarding,
contributing to shortages that have crippled normal life and spawned a
black market where gasoline has been sold at enormously inflated prices.
Fuel prices issued on Friday raised the gasoline price by more than 37%
with immediate effect.
"This is the stage before last of lifting the subsidy," said Georges
Braks, a member of the Petrol Station Owners' syndicate, who expects the
subsidy to be removed by the end of September.
He said the new prices were based on an exchange rate around 12,000
pounds per dollar.
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Lebanon's newly appointed Finance Minister Youssef Khalil looks on
during a handover ceremony in Beirut, Lebanon September 14, 2021.
REUTERS/Mohamed Azakir
This compares with a rate of 8,000 pounds per dollar that the previous
government agreed for fuel prices last month, but is still below the rate on the
parallel market, where dollars were changing hands at 14,600 on Friday.
UNAFFORDABLE SUBSIDY
The central bank said last month it could no longer afford to provide dollars
https://www.reuters.com/world/middle-east/lebanons-cbank-ready-use-mandatory-reserves-if-law-issued-2021-08-14
for fuel at heavily subsidised rates.
The move means importers will still be sourcing dollars from the central bank
rather than the market and so a subsidy still applies, said Mike Azar, a senior
Beirut-based financial advisor.
The pound has strengthened from around 19,000 per dollar since Mikati took
office, ending a year of political conflict over cabinet seats that left Lebanon
rudderless.
The IMF has recommended Lebanon unify the multiple exchange rates along with
other steps including the central bank audit.
Finance Minister Youssef Khalil, formerly a senior central bank official, signed
the contract with A&M, which the ministry said would present an initial report
within 12 weeks of its team starting work.
A&M withdrew from the audit last November, saying it had not received the
information it required. The finance ministry said in April the central bank had
agreed to hand over required documents.
Parliament then agreed in December to lift banking secrecy for one year, amid
much back-and-forth between Lebanese officials including the finance ministry
and the central bank over whether certain information could be disclosed.
Lebanon's talks with the IMF last year broke down largely due to a dispute over
the scale of losses in the financial system. A plan drawn up by the previous
government said these amounted to some $90 billion, a figure endorsed by the IMF
but rejected by Lebanese banks and the political elite.
(Reporting By Maha El Dahan; Writing by Tom Perry; Editing by Alex Richardson)
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