By Thalia Kattoura | Staff Writer
“We do not have any other choice, the fiscal situation has become unsustainable: we collect at the official rate but we spend at the parallel one,” said Caretaker Finance Minister Youssef Khalil to The National, as the black market value of the Lebanese pound against the dollar, reached 90,000 L.L by the end of February.
As the economic crisis dwindles further in Lebanon, Mr. Khalil had to request a tripling in the rate used for calculating customs taxes, which is raising the rate from 15,000 LL to 45,000 LL. Additional reasoning provided for this decision is that it would boost government revenues, which in turn would help “revive the public sector”. At a time when teachers are on strike and public schools are breaking down, reformative policies are demanded more than ever.
The Lebanese government had already executed a similar decision back in 2022, where they increased the rate from 1,507.5 LL to 15,000 LL. They then adjusted the official exchange rate to 15,000 LL to decrease gaps between the different exchange rates. Mr. Khalil’s intentions were to unify these varied exchange rates to get a hold of the crisis. The idea of said unification stemmed from one of the IMF’s pre-set conditions for Lebanon to get a $3 billion bailout. However, despite their compliance with this specific condition, the Lebanese government has reportedly been “very slow” with implementing reformative policies, according to the IMF.
Mr. Khalil also emphasized that “tax policies will be adjusted to limit the impact on vulnerable households.” The public was already becoming worried about the possibility of market instability; the country has been transitioning towards a dollarized economy, whereby prices of goods and services have been set in dollars.
Following these changes, the government received a considerable amount of backlash from economic experts. Sibylle Rizk, Director of Public Policies at advocacy group Kulluna Irada, stated that: “For now, there is no unification of the multiple rates but rather the introduction of new ones”.
As the exchange rate was being adjusted to 15,000 LL, many people came forward to express their concerns. “If the exchange rate to the dollar for customs is raised, the situation will further exacerbate and prices will skyrocket. The prices of medical care and basic needs, including food and education, are already soaring. An increased rate of the customs dollar will be catastrophic”, said Sarah Amin, a Lebanese public health worker.
However, the issue appeared to arise from the absence of concrete reformative policies. Despite these drastic economic measures, there is yet to be a thorough plan that addresses the economic deterioration and dissolvent of numerous working sectors. Sibylle Rizk attested that: “We need an overall budgetary strategy to restore the public finances’ sustainability through tax reforms and a considered allocation of public spending.”
Unfortunately, with delays in implementing essential proposals such as the capital control law, the parliament fails to fulfill its end of the deal with the IMF. These gaps in decision-making also align with the absence of a president–which happens to be the result of dead-end elections.