Lebanon’s caretaker premier rejects decision to end fuel subsidies

By Wassim Seif El-Din

BEIRUT (AA) – Lebanon’s caretaker prime minister on Thursday announced his rejection of the central bank governor's decision to lift fuel subsidies.

In a statement, Hassan Diab said Riad Salameh’s decision "is against the law and does not take into account the reality of the deep living and social crisis."

"The repercussions of the decision will be very serious,” Diab said, warning it would endanger the country’s future.

He also addressed a letter to Finance Minister Ghazi Wazni asking him to inform Salameh that his decision "violates the law which was issued by the House of Representatives … and contradicts the government's policy of rationalizing support."

Diab called for an emergency ministerial meeting on Thursday to discuss the central bank governor’s decision.

At a Thursday press conference, MP Gebran Bassil, head of the Free Patriotic Movement, slammed the sudden decision to completely lift subsidies on fuel as “fatalistic,” saying it is “nothing less than detonating the country.”

He warned of those seeking “to undermine the positive atmosphere between the president of the republic (Michel Aoun) and the prime minister-designate (Naguib Mikati),” which he said is supposed to be close in order to overcome “all obstacles.”

On June 26, Mikati received support from 72 out of 128 parliamentarians, including the backing of the Future Current movement headed by Saad Hariri and support from Hezbollah parliamentarians to form and head a long-awaited government.

-Country in crisis

Lebanon has been unable to form a new administration since the resignation of Hassan Diab's Cabinet on Aug. 10, 2020, six days after the massive Beirut port blast.

On Wednesday, Lebanon’s central bank said it is no longer able to support the purchase of fuel.

A foreign currency shortage and devaluation of the currency has caused the central bank's dollar reserves to dwindle from an average of $38 billion at the end of 2019 to its current average of $16 billion.

Official estimates put the cost of the Lebanese subsidy program for basic materials at about $6 billion annually, half of which goes to subsidize fuel.

According to a study by International Information, a Beirut-based research and consultancy firm, stopping the subsidy would lead to a significant rise in fuel prices, with the price of a can of gasoline expected to jump from about 75,000 pounds ($50) to 336,000 ($223) at a time when the minimum wage is 675,000 pounds ($448).

The bank has supported fuel imports by securing the dollar to importers at an exchange rate of 3,900 pounds ($2.59) per dollar, while its exchange rate in the parallel market in recent days topped 20,000 pounds ($13.30).

The Arab country is facing a severe economic crisis, with the local currency losing nearly all of its value against the dollar, and streets witnessing massive protests and rallies.

Observers say lifting fuel subsidies would raise the prices of other goods and services that depend on fuel to generate electricity for production such as factories and private bakeries.

*Writing by Ibrahim Mukhtar in Ankara