BEIRUT, June 25 (Reuters) – The acting Prime Minister of Lebanon on Friday approved a proposal to finance fuel imports at the rate of 3,900 Lebanese pounds to the dollar, instead of the previous rate of 1,500 pounds, against the backdrop of worsening gasoline shortages.
The lower exchange rate, which will effectively reduce the fuel subsidy, should increase the price of gasoline for consumers but allow the government to provide fuel for a longer period.
Lebanon is in the throes of a financial crisis described by the World Bank as one of the deepest depressions in modern history. Fuel shortages in recent weeks have forced motorists to queue for hours for drops of gasoline.
Lebanon’s subsidy program, introduced last year as the country’s economic crisis resulted in more difficult living conditions, covers basic commodities such as wheat, medicine and fuel and costs around $ 6. billion dollars a year.
Half of this amount is spent on fuel.
Lebanon’s central bank on Thursday asked the government to provide it with a legal basis to lend it foreign currency from its reserve requirements to finance subsidized fuel imports, an indication that the bank has all but depleted its reserves.
Minimum reserves – hard currency deposits deposited by local lenders at the central bank – represent a percentage of customer deposits and are generally not used, except in exceptional circumstances, with the appropriate legal permission.
Lebanon’s foreign exchange reserves stood at just over $ 15 billion in March. The Central Bank has not given an updated figure since then.
Reporting by Maha El Dahan; Editing by Alison Williams
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