Dana Khraiche, Bloomberg News
A worker in a scrapyard in Beirut, Lebanon, on Wednesday, April 14, 2021. Lebanon’s annual inflation rate reached a record high and food prices soared by around 400% in December, highlighting the dramatic impact on consumers and businesses of the country’s worst financial crisis in decades. Photographer: Francesca Volpi/Bloomberg , Bloomberg
(Bloomberg) — Lebanon’s parliament passed a law to distribute prepaid cards to thousands of families as authorities remove critical subsidies on goods and food.
The prepaid cards will allocate $556 million to 500,000 families for one year. Authorities will have to find ways to fund the cash transfers amid dwindling foreign-currency reserves.
Lebanon has approved a $246 million World Bank loan to fund programs for 180,000 families. Some 70,000 families are already benefiting from a European Union-backed program.
Lebanon Move to Cut Fuel Subsidies Set to Send Prices Soaring
Last week, Lebanon moved to reduce the impact of fuel subsidies on its foreign-currency reserves by authorizing the central bank to provide hard currency to fuel importers at a rate of 3,900 Lebanese pounds to a dollar for three months. That’s more than double the existing rate of 1,507 pounds per dollar, the now largely redundant official currency peg.
The move sent gasoline prices surging as the pound plunged on the black market. Authorities plan to ration whatever is left of their foreign-currency reserve and maintain subsidies on a number of medications and wheat.
Faced with its worst financial crisis in decades, the central bank had kept the peg for the import of wheat, pharmaceuticals and fuel, and used a weaker rate for importers of food. That became unsustainable as politicians failed to form a new government or enact reforms that would unlock international funds and resume talks with the International Monetary Fund on a bailout.
Lebanon defaulted on its $30 billion in international debt over a year ago. The currency crash eroded the life savings and the salaries of many Lebanese as they grappled with high unemployment and triple-digit inflation. The country has been under a caretaker government since August, when an explosion ripped through Beirut port, killing at least 200 people.
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