Diab warns ending subsidies would lead to ‘social explosion‘

Many Lebanese families now rely on charity. The meltdown could render people more dependent on political factions for aid and security, in a throwback to the militia days of the civil war.
Thursday 15/10/2020
Anti-government protesters stand in front of soldiers on a highway as they carry placards in Arabic that read “your salary has become $180,” referring to the minimum wage in Lebanon in the town of Zouk Mosbeh, north of Beirut, Lebanon. (AP)
Anti-government protesters stand in front of soldiers on a highway as they carry placards in Arabic that read “your salary has become $180,” referring to the minimum wage in Lebanon in the town of Zouk Mosbeh, north of Beirut, Lebanon. (AP)

BEIRUT –The parliamentary bloc of Lebanon’s Shia Amal party warned Wednesday against any “ill-considered moves towards lifting subsidies on key goods”, particularly wheat, fuel and medicine.

The central bank has provided foreign currency for importers of those three commodities as the Lebanese currency crashed and dollars grew scarce. But it has said it cannot finance trade indefinitely as foreign reserves dwindle.

The Amal party, led by the influential Parliament Speaker Nabih Berri, named the finance minister in the outgoing government.

Lebanon’s Prime Minister Hassan Diab is pictured after submitting his resignation to Lebanon’s President Michel Aoun at the presidential palace in Baabda, Lebanon August 10, 2020. (REUTERS)
Lebanon’s Prime Minister Hassan Diab is pictured after submitting his resignation to Lebanon’s President Michel Aoun at the presidential palace in Baabda, Lebanon August 10, 2020. (REUTERS)

Lebanon is mired in the worst economic and financial crisis in its modern history. It defaulted on paying back its debt for the first time in March, and the local currency has lost nearly 80% of its value amid hyperinflation, soaring poverty, and unemployment.

Talks with the International Monetary Fund on a bailout package have stalled since July.

 

The Labour Union called for protests next week against any move by the central bank to end subsidies.

Last week, Lebanon’s outgoing prime minister adamantly rejected any move to end subsidies of goods in the crisis-hit country, warning it would lead to “social explosion” as the central bank’s reserves dwindle and the local currency continues to drop, throwing more Lebanese into poverty.

A man counts Lebanese pounds at a currency exchange shop in Beirut, Lebanon October 1, 2020. (REUTERS)
A man counts Lebanese pounds at a currency exchange shop in Beirut, Lebanon October 1, 2020. (REUTERS)

Prime Minister Hassan Diab, who resigned in August — days after a massive blast in Beirut’s port killed almost 200 people and wounded thousands — said that the “Lebanese are passing through a difficult period amid divisions” between political and sectarian groups at the expense of the people.

He urged politicians in the corruption-plagued country to overcome their differences and form a new Cabinet that would quickly work on dealing with the crisis.

Diab said that had his government not decided to default on paying back the massive debt, the central bank’s reserves would have dropped $5 billion, to $17.5 billion.

He added that Lebanon paid $4 billion to subsidise imports of fuel, wheat and medicine — and the figure could reach $7 billion by year’s end.

“The central bank, along with all those who support or cover such a decision, shall bear the responsibility for any move toward lifting subsidies,” Diab said in a televised speech. He warned that such a move “will generate a social explosion with disastrous consequences.”

Some officials have said that in the next few months, the Central Bank is expected to end subsidies on basic goods. Since the local currency’s collapse, the bank has been using its depleting reserves to support imports of fuel, wheat and medicine.

Two months after the port blast, Lebanese expect life to get even harder.

Many families now rely on charity. The meltdown could render people more dependent on political factions for aid and security, in a throwback to the militia days of the civil war.

A worker arranges bottles of oil inside inside a supermarket in Beirut, Lebanon October 8, 2020.(Reuters)
A worker arranges bottles of oil inside inside a supermarket in Beirut, Lebanon October 8, 2020.(Reuters)

Some analysts have warned that security forces, their wages fast losing value, would not be able to contain rising unrest.

Hospitals fighting a surge in COVID-19 cases are overstretched. Fuel shortages have left city streets dark. Cars line up at petrol stations for rationed fuel.

“We’re scared we won’t be able to go on,” said Siham Itani, a pharmacist who fears price hikes and being robbed. She said supplies of insulin and blood pressure medication had dwindled.

Another pharmacist said a masked man had held her up at gunpoint, asking for baby food.