IMF package real solution for Lebanon: minister

Nehme said he remained optimistic that the talks between Lebanon and IMF will eventually lead to a positive result

Lebanese Economy Minister Raoul Nehme arrives to attend the cabinet meeting at the presidential palace in Baabda, Lebanon January 22, 2020.

Lebanese Economy Minister Raoul Nehme arrives to attend the cabinet meeting at the presidential palace in Baabda, Lebanon January 22, 2020.

REUTERS/Mohamed Azakir

BEIRUT: The real solution to Lebanon’s economic problems and the rise of the US dollar is an agreement with the International Monetary Fund, Economy and Trade Minister Raoul Nehme said.

“A solution with the IMF will be a real solution that covers all the needs of the population such as the social safety net and other things. Negotiations with the IMF is important and we hope to conclude it as quickly as possible,” Nehme told The Daily Star.

The minister, who launched the subsidized program for more than 300 items with the help of the Central Bank and other ministries, believes that government’s action will drastically reduce demand for the dollar in the black market but insisted that these steps are not sufficient if they were not matched by an agreement between Lebanon and IMF.

Coronavirus pandemic, anti-government protests and severe economic recession, distrust in the banking system have all contributed to the flourishing of the black market as the dollar rate reached close to LL10,000 before gradually falling below LL7,000 in recent days.

All these factors contributed to the spectacular rise in prices of most products in Lebanon as the purchasing power of most Lebanese dwindled dramatically.

Nehme said he remained optimistic that the talks between Lebanon and IMF will eventually lead to a positive result despite the resignation of the director-general of the Finance Ministry and two advisers.

“I don’t know the real motive behind the resignation but if I wanted to hear what everybody is saying then I should resign tomorrow. For example we covered more than 300 items in the subsidy program and because of one mistake they made a campaign and didn’t even thank me for launching this program,” the minister said.

According to Nehme, the subsidized program covers around $6 billion to $7 billion of imports out of total imports of $11 billion this year.

BDL has set the rate for importers and suppliers at LL3,900 based on the subsidized list of the Ministry.

Nehme said it is difficult to estimate how much the prices of consumer products will drop.

“We haven’t made calculations yet because we don’t know how it will affect the second basket. In the first basket, we have seen the prices drop quite significantly. We don’t expect a similar drop because in the first basket the rate was set at LL3,500 as of LL3,900 for the second basket,” he added.

Nehme said the cost of raw materials for local manufacturers went down.

“As for imported products I estimate that prices should go down by more than 30 percent but this depends on the items and volume.”

The minister did not dismiss the possibility of further decline in the dollar rate in the black market thanks to the subsidized program and the arrival of Lebanese expatriates who brought with them dollar banknotes.

“If the demand goes down then the dollar rate should go down. Not only the demand is going down the offer is also going down. We have a number of Lebanese returning to Lebanon and bringing with them dollars to give them to their families.”

Nehme argued that the black market is not as sizable as some people assume, estimating the daily transactions below $4 million a day and expected that this volume will go down further as subsidized products increases.

“As of Monday the importers will go to the banks to buy dollars at the rate of LL3,900 and this will decrease demand for the dollars in the black market. The dollar rate will drop drastically as of Monday” he added.

Nehme pointed out that many importers are expected to benefit from the subsidized program although he does not have the real numbers at the moment.

“As for the new list, I expect a huge number of importers will benefit from this program.”

Nehme argues that Lebanon is a free market economy and hence it is natural to see some differences in the prices of commodities between one supermarket and another and one store and another.

Bur consumer advocates stress that the prices in general are still rising in most stores despite the decline in the dollar rates in the black market and the launch of the subsidized program.

Responding to these reports, Nehme said that a number of items such as sugar and rice have already dropped, adding that the consumers will feel the difference once the second basket of more than 300 list will take effect.

The minister reminded that there are still many products that are priced at LL1,500 to LL2,000 to the dollar such as fuel oil, pharmaceutical products, wheat and this represents a very large part of the subsidized program.

“The real value of the dollar in Lebanon is not the black market. Black market represents a very low percentage of overall exchange of currencies in the country.”

The minister disclosed that the ministry has submitted several proposals that involve new consumer laws, protection of intellectual properties and insurance industry.

All these draft laws need the approval of the Cabinet and Parliament.

Nehme assured that the Central Bank is fully cooperating with the Economy Ministry in the subsidized program.

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