04 July 2008

BEIRUT: Inflation figures have become a matter of considerable debate in Lebanon.

The government says inflation is close to 10 percent, Central Bank Governor Riad Salameh believes it is more than 10 percent, and some leading economists say it is 15 percent at least. Regardless of whose figures are more accurate, what can be concluded is that inflation is taking a painful bite out of consumer purchasing power.

Officials and economists stress that price growth is a global phenomenon, adding that inflationary pressures are due to several factors: the continuing rise in oil prices, the depreciation of the US dollar against the euro in a dollarized economy that imports 60 percent of its needs from Europe, and climatic factors that have increase the prices of wheat and other grains in international markets.

Ghazi Wazni, an independent economist who has researched inflation and the cost of living in Lebanon, told The Daily Star that the country lacks a professional statistics department to carry out thorough studies on the movement of basic items.

"According to my calculations, inflation in Lebanon has reached 15 percent in 2008 and this ratio is very alarming," he said in an interview.

Another economist, Elie Yashoui, concurred.

The Consultations and Research Institute, a body formed by both the public and private sectors, said that the consumer price index up to May of this year rose by only 6 percent.

"The government is including a very small list of commodities in its monthly basket. This method should be revised," Wazni said. "The government prefers to show low inflation and cost-of-living figures in order to not give the trade unions an excuse to demand higher wages," he added.

Zhair Berro, the president of Consumer Lebanon, said recently that prices of basic items, including food, have risen by 47.5 percent in the last two years.

Yashoui added that the government includes items that are subsidized by the state such as tobacco and wheat.

"Let the government include other commodities that are not subsidized and I am sure we will have different consumer price index," he said.

Yashoui warned that prices  in Lebanon may well rise even further this year. He and Wazni offered several suggestions on how to deal with crisis.

"One of the ways to help consumers is to strengthen the exchange rate of the Lebanese pound by 5 to 10 percent against the dollar," Wazni said.

He said the Central Bank has abundant foreign currency cash reserves that would allow it to bolster the pound.

Other measures include the gradual removal of value added tax on some basic items, notably gasoline and fuel oil.

Many consumer advocates back another measure: ending the practice of exclusive agencies and allowing different companies to import the same items, thereby increasing competition and lowering prices.