For months, the fate of state subsidies for basic necessities has been one of the most important discussions in Lebanon.

Nowadays, almost no day goes by without the mention of subsidies, whether by civil servants and politicians or by trade unions and civil organizations.

Likewise, protests and strikes, which have been common in Lebanon in recent times, are rarely exempt from requests for subsidies.

The point is that the subject is the center of a lot of attention, and for good reason: in 2021 in Lebanon, many lives depend on subsidies. So what would happen if the subsidies were removed?

Lower the costs

When a state subsidizes a product, it pays for it in part to make it more accessible, especially to low-income people.

In Lebanon, the central bank subsidizes the import of fuel, medicine and flour at the official exchange rate of LBP / USD 1,515, while the parallel market sells the dollar for around £ 15,000.

It therefore goes without saying that the removal of subsidies would lead to massive increases in the prices of the above-mentioned products.

It has been estimated that removing subsidies without having a safety net in place would plunge over 80% of the Lebanese population into poverty (around 55% of the population is considered poor today).

This is why the subsidies are such a critical issue, and this is why the Lebanese government has carefully followed the idea of ​​removing them.

That said, removing the subsidies in itself is not the issue Lebanese officials have been pondering for months, as the central bank’s dwindling foreign exchange reserve cannot cover as much. This is what they would do next, and how they would prevent a social catastrophe on a scale unprecedented for the country.

One of the most popular alternatives offered for subsidies is the ration card; another hot topic on the political scene today.

Such a card would maintain social support by allocating a monthly salary to families to help them meet their basic needs in the midst of inflation.

While the project is still under review, it is estimated that it would support around 750,000 families at a total annual cost of around $ 1.2 billion.

For context, the subsidy program in its current form costs over $ 5 billion a year, so the ration card would, at least on paper, be an effective method of cutting costs that would not drown everyone in. destitution.

Fight for the crumbs

Another potential scenario that could come into play in the near future is the continuation of limited grants.

For example, instead of subsidizing fuel, medicine and flour, the government can continue to subsidize the latter without the first two.

In such a scenario, the prices of drugs used in the treatment of chronic diseases could remain fixed at the official exchange rate, while those used for serious conditions could be partially subsidized, said the head of the Order of Pharmacists of Lebanon. these last months.

Fuel, on the other hand, is likely to be the most seriously affected commodity in any subsidy rationing process.

According to the rationing plan proposed by the Ministry of Finance in 2020, the value of the state subsidy on gasoline would be lowered by 83%, while that of diesel would fall by 86%.

The inevitability of rising fuel prices was recently affirmed by Acting Energy Minister Raymond Ghajar, who urged the Lebanese to prepare for the end of subsidies. What remains uncertain is how exactly the process will unfold.

As they brace for the inevitable, many Lebanese wonder if they will be able to survive the next level of crisis, or if the state will fail them again with ineffective programs that leave them fighting for bread crumbs.


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