finance

Lebanon central bank starts giving credit for fuel imports at weaker rate



© Reuters. FILE PHOTO: Cars stand in line at a gas station as they wait to fuel up in Damour, Lebanon June 25, 2021. REUTERS/Aziz Taher

BEIRUT (Reuters) – Lebanon’s central bank said on Monday it would open credit lines to import fuel at 3,900 Lebanese pounds to the dollar, a weaker rate than previously offered that effectively raises the costs for ordinary Lebanese amid a crippling economic crisis.

Under a subsidy programme, the central bank had been using 1,500 pounds to the dollar, the official rate used for all transactions until the crisis that erupted in late 2019 precipitated a currency collapse. The street rate for the pound is now over 17,000 to the dollar.

Lebanon’s caretaker prime minister had on Friday approved a proposal to finance the imports at the new rate amid worsening fuel shortages.

Lebanon is in the throes of a deep financial crisis dubbed by the World Bank as one of the worst depressions in modern times. Basic goods such as medicine and fuel are running short as financing dries up.

Motorists in the past few weeks have had to queue for hours at gas stations to get barely any fuel, leading to violence in which gunshots were fired in some instances.

The weaker exchange rate, which will effectively decrease the subsidy on fuel, is expected to raise the price of gasoline for consumers but enable the government to supply fuel for a longer period of time.

The central bank had asked the government to provide it with the correct legal permission to dip into its mandatory reserves in order to provide financing for fuel, an indication that the bank has all but run out of foreign reserves.

Read More   Northern Trains ticket systems hit by suspected ransomware attack

Mandatory reserves – hard currency deposits parked by local lenders at the central bank – represent a percentage of customer deposits and are usually not drawn upon other than in exceptional circumstances.

Lebanon’s subsidy programme, which covers wheat, medicine and fuel, costs it around $6 billion a year, half of which goes to fuel.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.





READ SOURCE

This website uses cookies. By continuing to use this site, you accept our use of cookies.